The Federal Government’s directive for banks and fintechs to impose a 7.5 percent value-added tax on electronic banking services, starting January 19, 2026, raises significant worries about its impact on everyday Nigerians and the digital economy.
This policy targets fees for mobile transfers, USSD transactions, and card issuances. For instance, a N100 transfer charge now incurs an additional N7.50 in tax, directly increasing costs for users reliant on these services. In a nation where millions depend on affordable fintech for remittances and payments, this added burden could erode financial inclusion gains achieved over recent years.
Economists warn that the measure amplifies inflationary pressures. With living costs already high, extra taxes on essential banking functions might force low-income households to seek costlier alternatives, such as cash transactions, which slow economic efficiency. Small businesses, vital to Nigeria’s growth, face heightened operational expenses, potentially stifling innovation in the fintech sector that has boomed with platforms like Moniepoint.
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The government’s aim to standardize VAT collection and boost revenue overlooks the regressive nature of such taxes. Wealthier individuals, who often use premium services, absorb these costs easily, while the average citizen, earning modest wages, feels the pinch more acutely. This disparity could widen inequality, as digital financial services were meant to level the playing field.
Furthermore, the policy arrives amid other fiscal adjustments, including the reclassified stamp duty on transfers above N10,000. Combined, these changes risk dampening consumer confidence and reducing transaction volumes, which could harm banks’ profitability and limit credit availability for growth.
Advocates for consumer rights call for a review, emphasizing the need to protect vulnerable groups. As notices roll out, public discourse intensifies, questioning whether revenue goals justify the potential setback to Nigeria’s digital progress.
