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Mobile Money Taxation Could Hamper Financial Inclusion Gains in Africa
In an increasingly digital economy, accelerated by the Covid-19 pandemic, there has been greater collaboration between the private sector and governments in Africa to further the continent’s digital and financial inclusion agenda.
Financial inclusion, in particular, is both a pre-condition and a key enabler for meeting many of the UN’s Sustainable Development Goals (SDGs), including reducing poverty, boosting economic growth and promoting market access.
To this end various governments, including Kenya and Tanzania, have not only embraced digital transformation but also provided sound and enabling policy frameworks over the years to allow for innovative solutions that empower citizens.
For instance, mobile money platforms such as M-PESA have been vital drivers of financial inclusion on the continent. However, government tax policies pose a significant challenge to the sustainability of mobile money services and financial inclusion gains made by these innovations.
Vodacom Group’s policy paper on Mobile Money Taxation unpacks some of the impact that changes in mobile money taxation has on financial inclusion on the continent.
In the paper, Vodacom Group outlines that accessibility and affordability are two of the major draw cards of mobile money on the continent, giving people access to the most basic financial services.
M-PESA, the first and most successful mobile money payment service on the continent with 52million subscribers, is currently available in Kenya, Tanzania, Lesotho, the DRC, Ghana, and Mozambique with plans to make it available in Ethiopia.
“While many countries have embraced mobile money services, mobile money taxation can have unintended consequences for the people who stand to benefit significantly from these platforms”, says Stephen Chege, Group Chief Officer for Regulatory & External Affairs at Vodacom Group.
“We need to remember that many of the people who use mobile money are highly sensitive to transaction costs, therefore even a marginal increase in the fees associated with using these services could make them unaffordable. Higher transaction taxes may even compel some users to return to cash-based transactions”, notes Chege.
While taxation plays a critical role in helping governments across the continent meet their revenue targets and make up for the economic losses experienced during the pandemic, the policy paper outlines that this could potentially come at the expense of society’s most vulnerable if not appropriately implemented.
Emphasising the importance of considering how taxation could also affect service providers, the paper also suggests that increased taxes could hamper mobile money providers’ ability to make the investments necessary to provide services to the underserved.
“While these taxes are targeting mobile transactions because of their high volume, it is important to remember that the value per transaction is typically quite low. This means that taxation on mobile money transactions is unlikely to significantly expand the tax base and could instead, result in the reduction of tax revenue in the future”, adds Chege.
Where the tax burden is too high, there is a chance that providers will limit their investments, reducing mobile money penetration, leading to lower customer usage on the continent and consequently, the socio-economic benefits derived from these platforms.
Given these realities, the policy paper on Mobile Money Taxation makes the following recommendations:
– Mobile money taxation strategies can be developed in line with long-standing tax principles based on equity. This is essential to ensure that taxation does not exacerbate social divides and that the financial inclusion gains made on the continent are not lost.
– Tax policies can be structured in such a way that they are proportionate and broad-based in their application, rather than sector-specific.
– Governments and regulators can engage more robustly with mobile money operators and telcos on the unintended consequences of mobile money taxation to find a middle ground that is favourable for customers.
“It is common knowledge that the pandemic, the war in Ukraine, and climate change have all hampered Africa’s progress towards meeting the Sustainable Development Goals (SDGs).
“Mobile money plays a critical role in meeting some of these goals by driving financial inclusion and reducing poverty among the unbanked by empowering them to access credit, loans, savings and other essential financial services.
“Without sound and carefully implemented policies around mobile money taxation, we risk reversing the many financial inclusion gains already made on the continent”, concludes Chege.
British High Commission in Nigeria has reiterated the strong, long-standing relationship between the United Kingdom and Nigeria following the release of the UK Immigration White Paper earlier today.
A spokesperson for the High Commission stated that the UK remains a top destination for Nigerians seeking opportunities to work, study, visit, and settle, acknowledging the valuable contributions Nigerians make to the UK economy and society.
The White Paper outlines reforms to legal migration, aimed at restoring order, control, and fairness to the system while promoting economic growth.
The spokesperson assured that changes would be gradual, with further engagement between the UK and Nigerian government officials once implementation details are finalized.
“The UK has a proud tradition as an outward-looking nation, investing and trading abroad, and welcoming the creativity, ideas, and diversity of those who come to contribute here,” the spokesperson said.
The UK government has pledged to work closely with Nigerian authorities to ensure a smooth transition as the new immigration policies take effect
Nigerian Electricity Regulatory Commission (NERC) has directed nine electricity Distribution Companies (DisCos) to compensate Band A customers residing in 557 streets across their franchise areas for failing to meet the minimum power supply requirement under the new electricity tariff regime.
According to NERC, the affected DisCos must implement compensation across 152 electricity feeders due to poor supply in April.
The compensation will be provided through electricity credit or improved power supply, as outlined in the April 2025 Multi-Year Tariff Order.
The directive affects the following DisCos:
Abuja Electricity Distribution Company (AEDC)
Eko Electricity Distribution Company (EKEDC)
Port Harcourt Electricity Distribution Company (PHED)
Kano Electricity Distribution Company (KEDCO)
Kaduna Electricity Distribution Company (KAEDCO)
Ikeja Electric (IE)
Ibadan Electricity Distribution Company (IBEDC)
Benin Electricity Distribution Company (BEDC)
Enugu Electricity Distribution Company (EEDC)
The development follows a tariff hike of over 300% for Band A customers in 2024, which mandated a minimum daily power supply of 20 hours. Despite the increase, many consumers have continued to report poor service delivery, leading to the latest compensation directive.
NERC stated that affected DisCos must upgrade power supply in designated areas or provide electricity credits to customers who experienced service failures.
Socio-Economic Rights and Accountability Project has called on the Central Bank of Nigeria to immediately disclose whether it has commenced the direct disbursement of allocations to the 774 local government areas in Nigeria, following the Supreme Court’s landmark judgment nullifying state governors’ control over LGA funds.
In a letter dated 10 May 2025 obtained by our correspondent, addressed to the CBN Governor, Mr Olayemi Cardoso, and signed by SERAP’s Deputy Director, Kolawole Oluwadare, the group also demanded that the bank “widely publish the amounts, if any, so far sent directly to each of the local governments” and provide a detailed explanation of any payments already made—particularly to LGAs in Rivers State.
The group stated: “We are writing to request you to use your good offices and leadership position to immediately disclose whether the CBN has commenced the direct disbursement of allocations to the 774 local government councils in Nigeria from the Federation Accounts with the CBN, and to widely publish the amounts, if any, so far sent to each of the local governments.”
This request follows a Supreme Court judgment declaring the practice by governors and the FCT Minister of retaining and disbursing LGA allocations unconstitutional and unlawful.
The court ruled that no governor or agency has the authority to interfere with allocations meant for LGAs from the Federation Account.
Citing this judgment, SERAP argued: “Local government councils are entitled to a direct payment from the Federation Account of the amount standing to their credit in the said Federation Account. States should not be collecting, receiving, spending or tampering with the local government council funds from the Federation Account meant for the benefit of the councils.”
The advocacy group expressed concern that despite the ruling, many state governors have continued to “starve local governments of funds and put them in peril,” thereby undermining their autonomy and capacity to function as the third tier of government.
In the letter, the group warned that if the CBN fails to act within seven days, it would take legal action.
“If we have not heard from you by then, the Incorporated Trustees of SERAP shall take all appropriate legal actions to compel you and the CBN to comply with our request in the public interest,” the letter stated.
SERAP referenced a past revelation by former President Muhammadu Buhari, who in December 2022 described how governors allegedly short-changed LGA chairmen.
“If the money from the Federation Account to the state is about N100 million, N50 million will be sent to the chairman, but he will sign that he received N100 million. The chairman will pocket the balance and share it with whoever he wants to share it with,” Buhari had said.
The organisation argued that the CBN has a constitutional and statutory obligation to protect the financial interests of all tiers of government.
“The CBN ought to act in the public interest to protect the allocations in the Federation Account and the public funds disbursed from that Account directly to each of the constitutionally recognised three tiers of government,” it said.
Highlighting the March 2025 revenue distribution by the Federation Account Allocation Committee, SERAP noted that a total of N1.578 trillion was shared among the three tiers of government. It queried whether the LGAs had received their fair share directly, as mandated by the court ruling.
“Ensuring that all restrictions against direct disbursement of allocations from the Federation Account to the 774 councils are lifted will comply with the orders by the Supreme Court and stop states and the FCT from tampering with the allocations ahead of the 2027 general elections,” SERAP warned.
The group further argued that Nigerians have a legal and moral right to know how their money is being managed, referencing several legal frameworks, including the Nigerian Constitution, the Freedom of Information Act, the African Charter on Human and Peoples’ Rights, and the International Covenant on Civil and Political Rights.
“The public interest in publishing the information sought outweighs any considerations to withhold the information. Nigerians are entitled to the right to receive information without any interference or distortion, and the enjoyment of this right should be based on the principle of maximum disclosure,” SERAP stated.
The group also reminded the CBN that “the Freedom of Information Act is applicable and applies to public records in the Federation, including those kept by the CBN.”
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