FG’s VAT, EMTL Revenue Drive Put Financial Inclusion At Risk

… VAT, EMTL Generated Over N8tn Revenue In 11 Months

Nigeria’s ongoing economic reforms are increasingly reflected in its non-oil revenue performance, with Value Added Tax (VAT) and the Electronic Money Transfer Levy (EMTL) emerging as critical fiscal pillars.

An analysis of data of the first 11 months of 2025 of the Federation Accounts Allocation Committee (FAAC) data obtained from the Federal Ministry of Finance and analysed by THE WHISTLER showed that VAT and EMTL jointly generated N8.05tn, underscoring both the potential gains from the country’s tax reform drive.

Out of the total, VAT contributed N7.65tn, while EMTL accounted for N402.22bn, reinforcing the Federal Government’s reliance on consumption-based and digital transaction taxes amid declining oil revenues and subsidy-related fiscal pressures.

VAT: Strong Performance, Sharp Fluctuations

With a standard rate of 7.5 per cent on most taxable goods and services, VAT remained the dominant revenue source within the 11 months, although its performance was marked by notable volatility.

In January, VAT stood at N771.89bn, providing a strong opening baseline. This, however, dipped in February to N609.43bn, representing a 15.2 per cent decline, before rising to N637.62bn in March.

The trend reversed drastically in the second quarter. VAT rose to N742.82bn in May before sliding to N678.17bn in June, an 8.7 per cent month-on-month decrease, signalling discomfort by businesses and consumers in the new cost environment.

The most significant surge came in the third quarter. July recorded N687.94bn, up a minimal 1.4 per cent from June, while August posted N772.62bn, a significant surge of 12.31 per cent.

The standout month was September, when VAT peaked at N872.63bn, the highest in the 11 months, representing a sharp 12.95 per cent increase from August. This spike was largely attributed to improved compliance, higher prices, and stronger enforcement by tax authorities.

The momentum softened towards year-end as VAT fell to N719.83bn in October and dropped sharply in November to N563.04bn, a 21.79 per cent decline, reflecting seasonal slowdowns and broader economic strain.

Overall, VAT’s performance highlights both the resilience and fragility of Nigeria’s consumption tax base under reform-induced economic pressure.

EMTL: Digital Transactions Drive Growth

Though smaller in scale, EMTL demonstrated an unstable pattern, mirroring Nigeria’s uneven adoption of digital payment policies.

Introduced by the Finance Act 2020, EMTL imposes a N50 charge on electronic transfers of N10,000 or more, often referred to as a Stamp Duty.

EMTL is designed to generate revenue for federal and state governments by affecting transactions via banks, mobile money, and internet banking, with FIRS collecting it from the sender as a one-time fee, though transfers between one’s own accounts are exempt.

Starting from N21.4bn in January, EMTL rose significantly to N35.17bn in February, a 64.35 per cent increase, before sliding to N26.01bn in March.

By April, EMTL recorded a spike of 55.6 per cent as collections stood at N40.48bn, but transaction volume dropped to N28.82bn in May, a 28.8 per cent decline.

In June, EMTL rose slightly to N30.38bn, but the turning point came in July when collections surged to N39.17bn before moderating in August to N33.69bn.

The highest monthly EMTL collection was recorded in September, rising 59.82 per cent to N53.84bn. This spike coincided with wider adoption of electronic transfers and stricter levy enforcement.

EMTL volume moderated further as N49.87bn was recovered in October and N43.4bn in November. Despite fluctuations, EMTL consistently outperformed early-year levels, underlining its growing relevance.

Reform Signals and Fiscal Implications

Combined, VAT and EMTL revenues of N8.05tn in 11 months reflect the Federal Government’s strategic pivot towards non-oil taxation as a stabilising fiscal tool.

While VAT remains sensitive to inflation, consumer confidence, and economic shocks, EMTL’s growth trajectory points to the expanding digital economy as a sustainable revenue frontier.

However, sharp month-to-month swings also expose the limits of tax reforms in an economy grappling with high living costs, weak purchasing power, and compliance challenges.

As reforms continue, sustaining VAT growth without deepening economic hardship while refining EMTL to avoid overburdening digital transactions remains a delicate balancing act.

Recall that last Monday, January 19, 2026, the federal government mandated DMBs and fintechs to impose 7.5 per cent VAT on electronic services, such as mobile money transfers, USSD transaction fees, and card issuance fees.

Crucially, the tax is not applied to the principal amount being transferred, but only to the service fee. For example, if a bank charges N50 for a transfer, 7.5 per cent VAT (N3.75) is applied solely on that fee, while interest earned on savings and deposit accounts remains exempt.

However, experts have raised concerns that even this targeted approach could disproportionately affect low-income users who rely heavily on digital financial services.

They warned that without careful monitoring, the levy might discourage financial inclusion and increase the cost of everyday digital transactions, potentially undermining the very revenue gains it seeks to achieve.

A finance expert, Sarafadeen Atanda Fasasi, has faulted the planned 7.5 per cent

“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 oer cent VAT + N50 EMTL + Transfer charge N20-N200 + SMS charge N6. All paid by the buyer.

“The new law by the Nigeria Revenue Service is now asking the same buyer to pay another 7.5 per cent, having paid VAT on the primary article. This is against logic. 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 states.

Fasasi, warned that the NRS policy may push back the drive of financial inclusion, inhibit the Federal Government’s digital economy efforts and increase cash outside the banking system.

Speaking to THE WHISTLER, the Chief Executive Officer for the Promotion of Private Enterprise (CPPE), Muda Yusuf, noted that the electronic transfer levy has always been in existence and its achievement thwarted by misinformation.

Lauding the N8.05tn revenue, Yusuf said, “If we are recording this volume of transactions, nothing should change ordinarily. But if people get misinformed about the tax reforms, as we have some misinformation now that citizens’ balances should be taxed, but in reality, that is not the case.

“So the only thing that can alter this reform, is misinformation or panic which will resonate within people to embrace Cash transactions again.”

According to Yusuf, what is important at this point is to continuously educate the citizen, because the tax reform isn’t “changing anything as far as banking transaction is concern.”

He continued, “The new reforms are not bringing additional tax to transactions. It’s not increasing the level of an electronic levy, or expanding the coverage of an electronic levy. So nothing has changed.

“But unfortunately the hype around the tax reform is like a double-edged sword. Not many people understand the concept/language that is spoken even the literate.

“So that has also created some concern among people. The language of tax is a bit technical even for the literate not to take care of the illiterates and those controlling the informal sector with their vast population.

“The negative effect of misinformation is about financial inclusion and the cashless policy. On the cashless policy, the economy has made a lot of progress. Look at the volume of electronic transactions in the country. It’s mind-boggling. A lot of people, including the illiterate have adapted to the electronic transactions.

“But if this perception is not quickly corrected, it may reverse the progress that has been made in the cashless policy and financial inclusion.”

Yusuf further charged the federal government to amplify education across the rural areas, informal sectors, and beyond.

“To manage the risk is to intensify the education of people. Some of the misconceptions could push those who control the informal sector to return to the cash policy era because they are not used to paying for all these taxes.

“Nigeria is at a point where it needs to effect a major culture change as far as this tax is concerned, the change can only be gradual considering the size of the informal sector.

“But as people begin to experience the fact that nothing really has changed, and it will not affect the electronic transfer.

“Education has to be continuous, to curtail the risk to financial inclusion and cashless policy adoption.”

He further noted the funds should be judiciously and transparently used across the three tiers of government while urging citizens to demand accountability.

He said, “Citizens’ activism in a democracy is important to ensure that democracy dividends are delivered.”