Agent Association Rejects 7.5% VAT on Bank Transfers, Alleges Double Taxation

 

The National President of the Agents Association of Nigeria, Sarafadeen Atanda Fasasi, has strongly opposed the planned implementation of a 7.5 per cent Value-Added Tax on bank transfers and Unstructured Supplementary Service Data transactions, describing the measure as double taxation and warning it could undermine Nigeria’s financial inclusion objectives.

The controversy erupted following indications that emerged on Wednesday that Nigerians would begin paying the VAT on selected banking services from Monday, January 19, 2026, including mobile bank transfers and USSD transactions, pursuant to what was described as a new government-backed regulatory directive.

Fintech operator Moniepoint, in a notice dispatched to its customers on Thursday, indicated that the directive originated from tax authorities mandating financial institutions to commence VAT collection and remittance.

Fasasi, in his reaction to the development, argued that the policy amounts to duplicating VAT since payments are fundamentally for settlements of goods or services, and that payments do not exist in isolation. He maintained that every payment is linked to a primary article or service which is already taxed.

“For instance, buying a carton of Noodles at N20,000 from the supermarket or withdrawing the cash at PoS for the purchase currently attracts 7.5% VAT + N50 EMTL + Transfer charge N20-N200 + SMS charge N6. All paid by the buyer,” Fasasi explained.

He further stated that the new directive from the Nigeria Revenue Service now requires the same buyer to pay another 7.5 per cent, despite having already paid VAT on the primary article purchased, describing the approach as illogical.

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“If VAT is a company tax, it may be assumed that NRS is taxing service providers, but VAT is a consumer tax. The same blunder the FIRS made on Stamp Duty charged to the receiver’s account for years, before transferring tax liability to the sender recently,” he stated.

The Agents Association president warned that the policy could have far-reaching negative consequences for Nigeria’s economy. According to Fasasi, the NRS policy may push back the drive for financial inclusion, inhibit the Federal Government’s digital economy efforts, and increase the volume of cash circulating outside the banking system.

He projected that going forward, most Nigerians may resort to cash transactions as a means of avoiding the tax-prone electronic channels, effectively reversing gains made in promoting cashless transactions and digital financial services.

However, the Nigeria Revenue Service has issued a clarification, insisting that VAT is only applicable on charges collected by banks and not on customers’ transactions themselves.

In a statement made available to journalists and signed by Dare Adekanmbi, Special Adviser on Media to NRS chairman Zacch Adedeji, the service rejected reports suggesting that VAT has been newly imposed on banking services such as electronic transfers, fees, and commissions, describing the claims as incorrect.

According to the NRS, VAT has always applied to banking services and was not introduced by the Nigeria Tax Act. The revenue body emphasised that the tax regime on banking services is longstanding and not a recent innovation.

“The Nigeria Tax Act did not introduce VAT on banking charges, nor did it impose any new tax obligation on customers in this regard,” the statement read.

“The Nigeria Revenue Service wishes to address and correct misleading narratives circulating in sections of the media suggesting that Value Added Tax has been newly introduced on banking services, fees, commissions, or electronic money transfers. This claim is categorically incorrect.”

The NRS further explained that VAT has always applied to fees, commissions, and charges for services rendered by banks and other financial institutions under Nigeria’s long-established VAT regime, stressing that the Nigeria Tax Act did not introduce VAT on banking charges nor impose any new tax obligation on customers.

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While urging Nigerians to disregard what it termed false reports, the revenue service stated: “The Nigeria Revenue Service urges members of the public and all stakeholders to disregard misinformation and to rely exclusively on official communications for accurate, authoritative, and up-to-date tax information.”

The NRS also provided clarification on the scope of the VAT application, stating that the tax applies only where banks charge fees or commissions for services such as transfers, USSD usage, card issuance, and account maintenance. This distinction suggests that the VAT is intended to apply to service charges levied by banks rather than the transfer amounts themselves.

The dispute highlights ongoing tensions between tax authorities and stakeholders in Nigeria’s financial services ecosystem over the appropriate taxation framework for digital banking services. Value-Added Tax, introduced in Nigeria in 1993 to replace the erstwhile Sales Tax, is a consumption tax levied on goods and services at each stage of production and distribution. The standard VAT rate in Nigeria currently stands at 7.5 per cent, increased from five per cent in 2020.

The debate over taxation of banking services comes at a critical juncture in Nigeria’s digital transformation agenda. The Federal Government, through the Central Bank of Nigeria and other regulatory agencies, has been actively promoting cashless policies and digital financial services as tools for deepening financial inclusion and improving economic transparency.

Nigeria’s financial inclusion rate has improved significantly in recent years, rising from approximately 36.8 per cent in 2010 to over 60 per cent in recent assessments, driven largely by the proliferation of mobile money services, agent banking networks, and fintech innovations. However, analysts have consistently warned that excessive taxation and regulatory costs could stifle innovation and discourage the adoption of formal financial services, particularly among low-income populations and rural communities.

The Agents Association of Nigeria represents thousands of banking agents who facilitate financial transactions across the country, serving as critical intermediaries in extending banking services to underserved areas. The association’s opposition to the VAT policy reflects broader concerns within the financial services industry about the cumulative impact of various taxes, levies, and charges on digital transactions.