Nigerian fintech companies have begun implementing a new levy on electronic transfers in compliance with new regulations from the Federal Inland Revenue Service (FIRS). This move marks the end of the freemium banking era for millions of Nigerians, who have long enjoyed cost-free electronic transactions from the country’s fast-growing financial technology sector.
On September 9, 2024, OPay, one of Nigeria’s leading fintech platforms, informed its customers that a one-time charge of N50 would apply to all electronic transfers of N10,000 or more into personal and business accounts. In a public notice, the company explained that the fee was mandated by the Nigerian government, underscoring that it was not a revenue-generating measure for the platform. “It is important to note that OPay does not benefit from these charges in any way, as it is directed entirely to the Federal Government,” the notice read.
OPay is not alone in implementing these charges. Users of other fintech companies, such as Moniepoint and PalmPay, have also reported the introduction of similar levies. This shift follows the Nigerian government’s broader efforts to tap into the digital economy for revenue, as outlined in the Electronic Money Transfer Levy Regulations of 2022, issued under the authority of Zainab Ahmed, former Minister of Finance, Budget, and National Planning.
Government-Led Push for Digital Revenue
The regulations are based on the amended Stamp Duties Act (SDA) and stem from the Finance Act of 2020, which introduced the Electronic Money Transfer Levy. This levy imposes a N50 charge on any electronic receipt or transfer of N10,000 or more. For transfers conducted in foreign currencies, the charge is applied at exchange rates set by the Central Bank of Nigeria (CBN).
According to the law, it is the responsibility of financial institutions — including fintech platforms like OPay — to collect and remit the levy to the FIRS. The funds must be transferred to the tax authority by the next working day, ensuring that the government quickly recoups this new revenue stream. Banks and financial institutions must also maintain records of these transactions for at least seven years, further adding to their administrative burden.
Failure to comply with these regulations comes with steep penalties. Banks or institutions that fail to collect the levy will be liable for a penalty of 150% of the uncollected sum. If the levy is collected but not remitted to the FIRS, the institution is responsible for paying the levy plus a 50% penalty, along with interest calculated at the CBN’s Monetary Policy Rate.
The imposition of this levy has sparked concerns about its potential impact on Nigeria’s fintech industry, which has been one of the continent’s most vibrant and rapidly growing sectors. Since the early 2010s, fintech companies like OPay, PalmPay, and Moniepoint have disrupted traditional banking by offering users free and seamless transaction services. These platforms attracted millions of Nigerians, many of whom were previously excluded from the formal banking sector.
Economists warn that the N50 levy could undermine these gains, particularly for smaller businesses and individual users who have come to rely on cost-free digital banking. With electronic transfers now a daily necessity for many Nigerians, the cumulative cost of these levies could dissuade users from relying on fintech services as heavily as before, potentially driving them back to cash-based transactions or discouraging smaller transfers altogether.
While the fintech companies themselves have little choice but to comply with the FIRS regulations, there is concern that the new charges could hamper innovation in the sector, which has long thrived on its low-cost appeal. The fintech space in Nigeria is characterized by fierce competition, and companies have traditionally leveraged free services to attract and retain customers. The introduction of government-mandated fees threatens this model, raising questions about the long-term sustainability of Nigeria’s fintech ecosystem.
The Nigerian government’s push to generate more tax revenue from electronic transactions is part of its broader efforts to diversify income streams in a challenging economic environment. With the country’s reliance on oil revenues proving unsustainable, the government has been looking to the digital economy and other sectors to fill the fiscal gap.
This push, however, comes at a time when many Nigerians are feeling the squeeze from inflation and stagnant wages. As the cost of living rises, the imposition of new fees, however small, may be met with resistance from the public. Already, some Nigerians have taken to social media to voice their frustrations with the new charges, arguing that they disproportionately affect lower-income individuals and small businesses.
The Nigerian fintech industry, though relatively young, has been pivotal in expanding financial inclusion across the country, and the introduction of the new levy may challenge its ability to continue providing affordable and accessible services.
As the new levy takes effect, the question remains whether Nigerian fintech companies can adapt to this changing regulatory environment while maintaining their competitive edge. For now, the taxman’s demands signal the end of freemium banking in the Nigerian fintech landscape, with both businesses and consumers set to feel the impact.