Nigerians have continued to be burdened by all manners of taxes, tariffs and levies by the government and service providers with the latest being the introduction of a 0.5 percent cyber security levy by the Central Bank of Nigeria (CBN).
The development has come under scarthing criticisms by economic experts and Nigerians alike.
Economic experts that spoke with the Nigerian Tribune on Tuesday called for the suspension of the policy to prevent subjecting Nigerians to more hardships and save businesses from running down.
They highlighted that the policy goes against the Government’s repeated assurances that its plan to increase revenue would not include introducing new taxes or increasing tax rates, and demanded that the CBN’s circular should be withdrawn.
Taiwo Oyedele, Chairman, Presidential Fiscal Policy & Tax Reforms Committee had defined tax as, “Any payment to Government, central, state or local, to fund public spending, regardless of whether it is called a tax or not. It is: Mandatory – Not voluntary and penalties can be imposed for non-compliance”.
He said, “We do not need many taxes to collect much revenue, in fact the contrary holds true”, when he recently spoke on “Harmonisation and Codification of Taxes at National and Subnational
Level: Key to achieving a tax-friendly environment in Nigeria”.
According to the experts, already, Nigerians are overburdened, and their businesses will suffer substantial losses in profit, depleting returns on investment, erodes business capital, and may trigger business collapse if the policy is implemented.
Reacting to the imposition of 0.5 percent cyber security levy by the CBN, Professor Uchenna Uwaleke, Director, Institute of Capital Market Studies, Nasarawa State University, Keffi said the policy is ill-timed and should be reviewed, and suspended to engender financial inclusion.
He said, “I think the cybersecurity levy is ill-timed, coming at a time when the CBN is concerned about the high rate of financial exclusion and the increasing rate of currency circulating outside the banks.
“It carries the downside risk of discouraging financial intermediation as well as complicating the transmission of monetary policy with more people shunning the banks due to high charges. The end result is that it makes difficult effort by the CBN to tame inflation.
“So, I think the circular should be withdrawn especially against the backdrop of assurances by the government that its plan to increase revenue would not include introducing new taxes or increasing tax rates.
“To this end, the government should suspend the policy while getting set to implement the recommendations of the Presidential Committee on Fiscal Policy and Tax Reforms whose mandate includes streamlining multiple taxes and levies currently inhibiting the growth of businesses in Nigeria”.
In the same vein, Gbolade Idakolo Managing Director, SD&D Capital Management Limited frowned at the 0.5 percent cybersecurity levy on the grounds that many businesses are already struggling to survive due to inflation and high cost of doing business.
Idakolo told the Nigerian Tribune, “The decision of the Central Bank of Nigeria (CBN) to implement the cybersecurity act at this time is unfortunate because many businesses are already groaning with depleted profits due to inflation and cost of doing business, adding this additional burden on businesses especially will be herculean.
“Imagine a N10 million transfer attracting N50,000. The charges need to be reviewed or totally stopped because of its attendant negative implications on the economy. Already overburdened Nigerians and thier businesses will suffer substantial losses in profit if the policy is implemented”.
‘Nigeria’s cyberspace must be managed’
For Aliyu Ilias, a financial analyst, “Nigeria’s cyberspace needs to be managed. This is the core responsibility of the Central Bank of Nigeria (CBN) and other agencies.
“The 0.5 percent charge on people is too much. If it’s 0.2 percent or 0.3 percent that would have been better, and the people will not feel it. If I’m transferring N1000 it simply means that I’ll pay a huge amount as levy. It should be insignificant that people will not feel it much. I don’t know why there will be a 2015 Act and it’s activated now. They should look at the contemporary laws governing such thing globally, though the cyberspace is becoming very insecure, it has to be managed.
“For me, I wouldn’t say they shouldn’t charge but it’s too much . The money is going to the National Security Adviser (NSA), why? The money should go to the CBN for management and to fund them appropriately”.
A bank customer, Temitope Falade said such levy will take more money out of already lean pocket of most Nigerians.
He added that as it stands, if a person transfers ₦100,000 to a different bank, such customer will pay ₦53 transfer fee, ₦500 cyber security fee and the beneficiary pays ₦50 stamp duty, making up a total of ₦603.
Similarly, a United States-based innovator and tech entrepreneur, Professor Ndubuisi Ekekwe, says the CBN’s directive comes amid escalating threats posed by cybercriminals.
According to him, with the rapid digitization of financial services and the increasing reliance on electronic transactions, Nigeria’s digital infrastructure has become a prime target for cyber attacks.
N17.62bn lost to fraud – NIBSS
The Nigeria Inter-Bank Settlement System (NIBSS) said that financial institutions lost about N17.67 billion to fraud in 2023.
“Thus, the implementation of the cybersecurity levy is believed to be a proactive measure to safeguard against these threats and protect the integrity of Nigeria’s digital economy, “ he stated.
However, while the cybersecurity levy is a step in the right direction, Ekekwe said its implementation also raises several challenges and implications for both consumers and businesses.
Everyday user may experience concerns about the potential increase in the cost of digital services, as the levy is likely to be passed on to consumers in the form of higher transaction fees.
“This could impact consumer behavior and adoption rates of digital financial services, particularly among low-income individuals who are more sensitive to changes in transaction costs.
“Similarly, businesses will need to adjust their financial strategies to accommodate the levy, balancing the need for compliance with the imperative of managing operational costs. The stringent penalties for non-compliance, including fines amounting to no less than two percent of the annual turnover for defaulting businesses, underscore the seriousness of this initiative and the importance of adherence to cybersecurity protocols,” the University don cautioned.
Despite these challenges, many believe the implementation of the cybersecurity levy is a representation of a crucial step forward in Nigeria’s efforts to strengthen its digital resilience.
They believe that by investing in cybersecurity infrastructure and capabilities, Nigeria can better protect its digital assets and safeguard against the potentially devastating impact of cyberattacks.
‘Only the rich should be levied’
Also, a diaspora based medical doctor took to his verified X (formerly Twitter) handle (Favour online) to make vent his resentment while offering suggestions on the best approach that the federal government through the CBN should have adopted.
His words: “The sensible thing to do is to apply this levy if we have to apply it at all on those who are rich. Not on the poor and not on everyone. The sensible thing to do will have been to say the 0.5 percent bank transaction levy only apply to transactions from 10 million naira and above.
“That way, you protect the poor, you protect the masses and you focus the tax on the rich. Right now, with the levy as it is, every time you send N1,000 you pay extra N5. Every time you send N10,000 you pay extra N50. Every time you send N100,000, you pay N500, Every time you send N500,000 you pay extra N2,500.”
According to him, the vast majority of Nigerians- who are poor and struggling- do the most bank transactions under/around N500,000. “And to make these poor struggling people pay extra money per transaction is callous, cruel and inhumane.
“This is an open public appeal to the federal government and the CBN. Please carry on with your levy if you have to- but please target the rich only, and please spare the lives and the finances of the masses. Please let the poor breathe. Do NOT strangle and suffocate the poor to death.
“A fair sensible compromise is to put a minimum transaction amount for the levy to kick in. I suggest that this 0.5 percent cybersecurity levy should NOT apply to anyone who sends any money less than N10 million, “ he stated.
Lending his voice, a public affairs commentator Mr Yinka Ogunnubi remarked that there is a Cyber security (Prohibition, Prevention, etc) Amendment Act 2024 (An Amendment of the 2015 Act) which prescribed a levy of 0.5percent of all transaction value.
He explained that four days ago, the NSA directed the full implementation of the Act. This was referenced in the first paragraph of the CBN circular.
“The fee is a debit charge on the initiator of the electronic transfer and not for the receiver of the transfer. This is not a bank levy. It was not initiated by the CBN. It is a Tax payable to the government. Think of it as a second AMF (Account Maintenance Fee) but this time to the government and not the bank. The CBN is just an implementation entity.
“In case you’re wondering, this Cyber Security Levy is not newly introduced in 2024. It was in the original Cyber Security Act 2015 as signed into law by President GEJ. The provision was always there but never implemented. The decision to implement is that of this administration, “ Ogunnubi remarked.
Other analysts said the challenge against the CBN directive is not in the arithmetic disparity, but on the legal basis for the remittance.
Some have raised questions as to: Why are Nigerians directly funding the activities of the ONSA? What is the relationship between electronic financial transactions and national security? How does a simple bank transfer from Festus to Effiong affect national security in such a manner that Festus must pay cyber security charges? What are the specific national security challenges that the Federal Government has recently faced to warrant it to ask Nigerians to pay for increased surveillance?
Withdraw level, SERAP tells Tinubu
Meanwhile, a civil society organisation (SERAP), has urged President Bola Tinubu to use his “good offices to immediately direct the Central Bank of Nigeria (CBN) to withdraw the cybersecurity levy on Nigerians as it patently violates the provisions of the Nigerian Constitution 1999 [as amended] and the country’s international human rights obligations and commitments.”
In a statement on Tuesday, the anti-corruption advocacy group called for the review of the amended law that the CBN seeks to implement with the new directive.
The CBN on Monday ordered banks to charge 0.5 percent, equivalent to a half percent cybersecurity levy on transactions. A circular from the apex bank disclosed that the implementation of the levy would start two weeks from today.
The apex bank exempted :Loan disbursements and repayments; Salary payments; Intra-account transfers within the same bank or between different banks for the same customer; Intra-bank transfers between; customers of the same bank; Other Financial Institutions instructions to their correspondent banks; Interbank placements; Banks’ transfers to CBN and vice-versa; Inter-branch transfers within a bank; Cheque clearing and settlements, Letters of Credits among others.
With the 0.5% for Cyber security, a withdrawal of:
20,000,000 = 100,000
10,000,000 = 50,000
2,000,000 = 10,000
500,000 = 2,500,
100,000 = 500
50,000 = 250
10,000 = 50.
Levy another stealth tax on the private sector – NACCIMA
The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) has raised concerns over the recent directive by the CBN on the implementation of the levy on all electronic transactions, describing it as another stealth tax on the private sector.
In a statement, the National President of NACCIMA, Dele Kelvin Oye, said while it is important to bolster the country’s national cyber security infrastructure, the blanket imposition of this levy without a limit raises significant issues that warrant a thorough review and reconsideration by the authorities.
He said: “We are still in consultation with our stakeholders, however, we feel compelled to comment on the implementation of this cyber security levy as outlined in a circular dated 7th May, 2024 and signed by the respective Directors of the CBN Payments System Management Department and the Financial Policy and Regulation Department of the CBN.
“While NACCIMA recognises the importance of bolstering our national cyber security infrastructure, the blanket imposition of this levy without a limit raises significant issues that warrant a thorough review and reconsideration by the authorities.
“Firstly, the security and defense sectors are already substantial recipients of the national budget. They are responsible for tackling a hybrid of security challenges like terrorism, banditry and other internal conflicts in Nigeria.
“However, cyber security is firstly a transnational issue which requires cooperation between international security agencies and requires highly skilled and experienced human resources. For this reason, we believe the burden should be shared across the current security and defense budget.”
Oye further noted, “With over 600 trillion naira (NIBSS 2023) in transactions annually, the projected revenue from this levy is considerable. Therefore, we expect transparency in the application of these funds through clear performance metrics essential to justify the additional levies.
“For this reason, we must ask: what proportion of ALL online transactions are fraudulent transactions? In what way will this levy counteract such transactions? With incidence rates significantly lower than the levy rate, there is a mismatch that needs to be addressed. We will therefore advise a maximum levy cap of Five Hundred (500) naira. It is also a fact that other methods exist to reduce local online cybersecurity risks through professional private sector experts.”
According to him, “Secondly, the allocation and administration of the levy funds are critical. The organized private sector must be involved in the oversight and management of these funds to ensure efficiency and effective use of the levy for public and private sector services, akin to an estate service charge model. Without this, there is a risk of misapplication and lack of accountability.
“Thirdly, the introduction of this levy may be in contravention of the constitutional provision mandating all revenues to be deposited into the consolidated fund, which can only be utilized following appropriations by the National Assembly. We await further guidance on this position.
“Finally, electronic banking transactions are pivotal in advancing financial inclusion for individuals in remote or underserved regions. This levy could potentially discourage the use of e-business platforms, undermining efforts to foster economic growth and financial participation.”
The NACCIMA boss further stated, “The imposition of this levy, which comes at a time when the business community is anticipating the final recommendations from the Presidential Fiscal Policy and Tax Reforms Committee, is particularly troubling.
“We were reassured that the tax system would be streamlined to no more than ten significant types. However, this new tax could detrimentally affect Nigeria’s competitiveness in the Ease of Doing Business rankings, discourage foreign direct investment, instigate capital flight, and exacerbate the talent drain in the technology sector.
“In light of these concerns, NACCIMA appeals to the Central Bank of Nigeria and the relevant authorities to reconsider the imposition of this cyber security levy. We urge a suspension of the levy for a few weeks pending a comprehensive review and consultation with key stakeholders. It is imperative to ensure clarity in its implementation and to align it with the broader fiscal policy and tax reform objectives that support the growth and competitiveness of the Nigerian economy.”
The statement added, “NACCIMA remains committed to constructive dialogue and collaboration with the government to find a balanced approach that protects our economy from cyber security threats while also fostering a conducive environment for business and investment.”
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