The Nigerian Labour Congress, NLC, Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), others on Tuesday faulted the timing of the newly imposed 0.5 percent tax on most electronic transactions by the Central Bank of Nigeria (CBN).
The CBN announced the new tax on Monday, explaining that the new charge was part of efforts to contain the rising threat of cybercrime in the financial system.
But many stakeholders, institutions, and financial market analysts condemned the new levy as an unnecessary extra weight on a stressed and fraught citizenry.
They included Nigeria Labour Congress (NLC); National President of Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Mr. Dele Kelvin Oye; Socio-Economic Rights and Accountability Project (SERAP); and Managing Director, Financial Derivatives Company Limited, Bismarck Rewane.
The new fee was also denounced by Chief Executive Officer of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf; former Commissioner for Finance, Imo State, Professor Uche Uwaleke; and other financial market analysts.
SERAP threatened possible lawsuit if the federal government did not withdraw the levy within 48 hours.
CBN stated that implementation of the levy followed the enactment of the Cybercrime (Prohibition, Prevention, etc.) (amendment) Act 2024, and was pursuant to the provisions of Section 44 (2)(a) of the Act, which provided for the rate deduction.
Under the new CBN directive, if a customer, for instance, wants to transfer N10,000, the customer will be charged N50 as cybersecurity levy, aside other charges incurred on the transaction, like Value Added Tax (VAT).
Nigeria Interbank Settlement System (NIBSS) said electronic payments on its platform in 2023 were N600 trillion and 0.5 percent of this sum is N3 trillion, which analysts stressed would be a heavy burden on the citizens. They further lamented the effect of the new levy on new businesses struggling to set up.
The levy was conveyed in a circular dated May 6, 2024, and addressed to all commercial, merchant, non-interest and payment service banks; other financial institutions, Mobile Money Operators and Payment Service Providers. It was jointly signed by CBN Director, Payments System Management Department, Chibuzo Efobi, and Director, Financial Policy and Regulation Department, Haruna Mustafa.
The central bank explained that the deducted funds were to be remitted to the National Cybersecurity Fund (NCF), which shall be administered by the Office of the National Security Adviser (ONSA).
With few exemptions, all banks, Other Financial Institutions and Payments Service Providers are required to implement the new provision of the Act as directed.
However, NLC stated that the cybersecurity levy as well as several other levies and taxes already imposed on the citizens had deepened the financial burden on the populace currently grappling with economic challenges.
A statement signed by NLC President, Joe Ajaero, demanded the reversal of the directive by CBN, adding that the federal government should prioritise policies that alleviate the financial burdens of Nigerians.
NLC said the move, which was ostensibly aimed at bolstering cybersecurity measures, was capable of exacerbating the financial strain already faced by the populace.
It stated that while CBN had exempted interbank transfers and loans transactions from the levy, the broader impact on everyday transactions could not be overlooked.
NLC said in the statement, “This levy, to be implemented by deduction at the transaction origination, is yet another burden on the shoulders of hardworking Nigerians.
“The directive comes on the heels of the recent implementation of stamp duty charges on mortgage-backed loans and bonds by the federal government, further straining the financial resources of Nigerians. These successive levies only serve to deepen the financial burden on citizens already grappling with economic challenges.
“The NLC calls on the federal government to reconsider these directives and prioritise policies that alleviate the financial burdens of Nigerians.
“We urge a collaborative approach between the government, regulatory bodies, and stakeholders to develop sustainable cybersecurity measures that do not unduly burden the populace.”
NLC added, “We continue treading on the edge and it is not certain which uncaring policy will tilt the balance and throw us into a socioeconomic spiral
“The NLC recognises the importance of cybersecurity in today’s digital age. However, imposing such a levy on electronic transactions, without due consideration for its implications on workers and the vulnerable segments of society, is unjustifiable.
“This levy stands as another tax too much for Nigerians, burdening them with additional financial responsibilities.
“We see in this levy another gang up by the ruling elite to continue its extortion and exploitation of hapless and helpless workers and the masses so that their cronies in various financial centres can continue wallowing in unbridled consumption.
“During our last May day speech we called on the government to prioritise the welfare of Nigerian workers and masses in their policy directions and actions instead of profit seeking that unleashes more pressures on the people.
“We wonder when it has become a crime for the people to save their meagre incomes in the banks and whether it is the intention of government to encourage people to resort once again to keeping cash and using cash transactions instead of electronic transfers, which has seemed to have become an undoing for the people?
“NLC further lamented that such deductions directly affect the disposable income of workers and further diminish the purchasing power of the common citizen.”
According to NLC, domestic manufacturers and other businesses are already shuttering as a result of the stifling socioeconomic environment.
Yet, NLC said, instead of creating a business-friendly environment to encourage greater investments in the economy, “The opposite seems to be what is being practised. How can you attract foreign investment when you make the business environment difficult?
“Moreover, the threat of fines amounting to not less than two percent of an institution’s annual turnover for non-compliance adds further pressure on financial institutions, potentially leading to a trickle-down effect on consumers.
“Definitely, the businesses will pass down these costs to consumers, which will lead to further inflation in an economy that is already in the grips of hyper-inflation.”
NLC wondered, “How would domestic manufactured goods and services remain competitive in the midst of all these costs and how would the businesses expand capacity, thus, employ more Nigerians when they cannot sell their products because of high prices?
“Monies raised in the past have not helped in making lives better for the citizenry, neither have they been seen in better infrastructural provisions. Extracting this levy from the people who are already kwashiorkored by government policies in order to throw money at cybersecurity will not make our cyberspace better, just like it has been our experience in the past.
“We see this as a cybersecurity levy that will inflict severe social security on workers and masses.”
In his own reaction, Rewane stated, “Does it mean that if there was no levy there won’t be fight against cybercrime? Whether there was a levy or not, we would have loved to fight cybersecurity.”
The economist pointed out that the responsibility for fighting cybercrime ought not to be imposed on the citizens, even though the citizens must be protected, which is the more reason they pay taxes.
Rewane added, “Is this levy a premium so that if I lose money from a cyberattack I would get refunded? So, I am not really clear as to what this levy was supposed to achieve. The amount involved in question is quite astronomical. What is the money going to be used for?
“We need some clarity. But to announce that with immediate effect people should start paying is startling to me. When Yemi Cardoso came in as CBN governor, there were consultations and feedback. In other words, he consulted and came back to say the things he would like to do.
“Imposition of this levy is not consistent with the consultation and feedback culture which the CBN has.”
On its part, SERAP urged President Bola Tinubu to immediately direct the CBN to withdraw the cybersecurity levy.
The group stated that the levy “patently violates the provisions of the Nigerian constitution 1999 (as amended) and the country’s international human rights obligations and commitments”.
SERAP further urged the president to stop the National Security Adviser (NSA), Mr. Nuhu Ribadu, and his office from implementing Section 44 and other repressive provisions of the Cybercrimes Act 2024, as it “flagrantly violates the provisions of the Nigerian constitution and the African Charter on Human and Peoples’ Rights and International Covenant on Civil and Political Rights to which Nigeria is a state party”.
The organisation also urged Tinubu to direct the Attorney General of the Federation (AGF) and Minister of Justice, Mr. Lateef Fagbemi, to immediately prepare and present a bill to amend Section 44 and other repressive provisions of the Cybercrimes Act 2024 to the National Assembly, “so that those provisions can be brought in line with the Nigerian constitution and the country’s international human rights obligations”.
The group further issued a 48-hour notice to the federal government to reverse the 0.5 percent cybersecurity levy imposed on electronic transactions or risk legal action.
It described the CBN’s directive as “grossly unlawful” and called on the president to immediately withdraw the directive.
SERAP Deputy Director, Kolawole Oluwadare, said, “The Tinubu administration must within 48 hours withdraw the patently arbitrary and unlawful CBN directive purportedly imposing cybersecurity levy on Nigerians.
“Section 44(8) criminalising the non-payment of the cybersecurity levy by Nigerians is grossly unlawful and unconstitutional.
“Our lawyer, Ebun-Olu Adegboruwa, is already preparing the necessary court papers, should the administration fail or neglect to act as recommended.”
Oluwadare said, “The administration must urgently take concrete and effective measures to ensure the repeal of Section 44 and other repressive provisions of the Cybercrimes Act 2024.
“If the unlawful CBN directive is not withdrawn and appropriate steps are not taken to amend the repressive provisions of the Cybercrimes Act within 48 hours, SERAP shall consider appropriate legal actions to compel the Tinubu administration to comply with our request in the public interest.
“Withdrawing the unlawful CBN directive and repealing the repressive provisions of the Cybercrimes Act 2024 will be entirely consistent with President Tinubu’s constitutional oath of office, (which) requires public officials to uphold the provisions of the constitution, and the rule of law and abstain from all improper acts.”
He added, “The repressive provisions of the Cybercrimes Act 2024 are clearly inconsistent and incompatible with the public trust and the overall objectives of the constitution. A false oath lacks truth and justice. The oath statements require the oath takers to commit to uphold and defend the constitution.
“Section 14(2)(b) of the Nigerian constitution of 1999 (as amended) provides that, ‘The security and welfare of the people shall be the primary purpose of government.’
“The CBN yesterday has directed banks and other financial institutions to implement a 0.5 percent cybersecurity levy on electronic transfers on the basis of the Section 44 44(2)(a) of the Cybercrimes Act 2024 purportedly imposing ‘a levy of 0.005 equivalent to a half percent of all electronic transactions value by the business specified in the second schedule of the Act.
“The money is to be remitted to the National Cybersecurity Fund (NCF), which shall be administered by the Office of the National Security Adviser (ONSA).”
Similarly, Uwaleke urged the central bank to immediately withdraw the new circular directing banks to charge a 0.5 percent levy on electronic transactions.
According to him, such withdrawal is against the backdrop of assurances by the government that its plan to increase revenue would not include introducing new taxes or increasing tax rates.
Reacting to the apex bank’s directive in a comment made available to THISDAY, Uwaleke, who is Director of the Institute of Capital Market Studies, Nasarawa State University, described the levy as mistimed.
Uwaleke stated, “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.”
For Yusuf, the cybercrime levy was more troubling because “it is a tax on electronic transactions and not on profit and has no regard to whether a business is healthy or not as even loss making companies are liable”.
He stated, “The poorer segments of society are not exempted either. This raises serious issues of equity.”
Yusuf noted that by the account of the NIBSS, electronic payments on its platform in 2023 was N600 trillion and 0.5 percent of this sum is N3 trillion.
He said, “It is difficult to rationalise spending this much on fighting cybercrime. Meanwhile, total budget appropriation for defence and security in the 2024 budget was N3.2 trillion; and infrastructure appropriation was N1.32 trillion. These are just appropriations; though actual releases are often much less.”
He pointed out that this levy posed a threat to the cashless policy of the central bank over which significant progress had been made.
Yusuf stated, “We are likely to see an increased migration to the use of cash as against electronic platforms.
“We plead with the relevant authorities to put the implementation of the legislation on hold while a thorough review is done.
“We propose a robust stakeholder engagement to review the legislation. In its present form the legislation will impose more hardship on the citizens and more burdens on investors.”
Similarly, Oye described the 0.5 percent levy as “another stealth tax on the private sector”.
The NACCIMA national president added, “We are still in consultation with our stakeholders, however, we feel compelled to comment on the implementation of this cybersecurity levy because 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 and should tackle a hybrid of security challenges like terrorism, banditry and other internal conflicts in Nigeria.”
Oye suggested a maximum levy cap of N500, insisting, “The organised 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 utilised following appropriations by the National Assembly. We await further guidance on this position.”
He added, “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 CBN and the relevant authorities to reconsider the imposition of this cybersecurity levy. We urge a suspension of the levy for a few weeks pending a comprehensive review and consultation with key stakeholders.”
Speaking in the same vein, former President of Chartered Institute of Bankers of Nigeria (CIBN), Mr. Okechukwu Unegbu, questioned the legality of the levy.
Unegbu, who is also a lawyer and former teacher of banking law at the University of Lagos, stated, “On what law is the CBN relying to introduce this charge and who is going to benefit from it? I have gone through the Cyber Security Act and did not see it. The CBN should tell us the section of the legislation it is relying upon. That is what I am insisting on.
“There is no law backing this levy and I stand by my words. Even if a law has been made, the CBN should quote the very section of that law it is relying on. It cannot just say Cyber Security Act without specifying the exact section of this law that gave it power to start making this levy. The charge, for me, is illegal until a court of law rules on it.”
Similarly, former Registrar/Chief Executive Officer of CIBN, Dr. Uju Ogubunka, told THISDAY that the levy would constrain businesses to resort to the use of cheque and cash for payments.
Ogubunka said, “I never contemplated that such a thing will be happening in our own environment at this point in time, especially. Why will the CBN tax people who are making simple transfers from one person to another and at the same time trying to de-emphasise the use of cash?”
He said the enforcement of the levy would increase the volume of money outside the banking system and make the effectiveness of monetary policy decisions suspect.
He also feared that the levy would precipitate another wave of cash scarcity in the economy.
According to Ogubunka, “There will likely be another wave of cash scarcity for those unwilling to use electronic transfer in order to avoid the levy, if the government is not printing enough cash.
“The only thing that could happen is people will resort to cheque and use it to make payments. Then, the turnaround of business will take longer time.
“It is like we are taking many steps backward. It is a sad situation for me as an individual because we are not moving forward as we ought to be moving.
“There are many things to tax people on but not on transfers for God’s sake. On one hand we are promoting electronic payment and de-emphasising cash transactions and on another hand we are saying that if you patronise electronic payment I will charge you.”
An economist and investment specialist, Dr. Vincent Nwani, stated that electronic transactions were vital for driving economic growth, and Nigeria recognised this by implementing diverse policies to induce and incentivise cashless transactions since 2013.
Nwani explained further, “Over the years, we have seen remarkable impact of thriving electronic transactions in the country. For instance, we saw a remarkable 55 percent surge in the total electronic payments, from N387.00 trillion in 2022 to N600 trillion in 2023.
“Furthermore, the volume of transactions on e-payment platforms experienced an impressive 79.04 percent increase, rising from 541 million in January 2023 to 968.59 million by December 2023.
“Nigeria loses $500 million annually to cybercrime and this levy will potentially provide a dedicated source of funding for cybersecurity efforts.
“A strong cybersecurity framework enhances investor confidence because it boosts investors’ confidence on the security of their digital transactions. Notwithstanding, how much the objective of securing the cyberspace will be realised through new levy remains to be seen,
“Businesses are increasingly scaling down, cutting back employment and adapting all sorts of lean measures in a bid to navigate an extraordinary challenging business environment.
“Customers and the public on the other hand are struggling with high cost of living, declining real wages and lower consumption exacerbated by recent reforms, such as removal of full subsidy, floating of the FX, increase of electricity tariff, increase of lending rate, etc.
“The new cybersecurity levy serves as another wave of financial burden on businesses and the public with attendant implication, such as undermining financial inclusion drive and discouraging e-transactions.”
Head of Financial Institutions Ratings at Agusto & Co., Mr. Ayokunle Olubunmi, said the new policy had positive and negative implications.
On the positive side, Olubunmi highlighted the potential for enhanced cybersecurity and reduced bank fraud if the funds generated from the levy were effectively utilised.
However, he raised concerns about potential drawbacks of the policy.
Olubunmi pointed out that while the levy might appear insignificant for small transactions, it could lead to substantial costs for high-volume transactions. He emphasised the risk of this policy impacting financial inclusion efforts, as some individuals might use it as an excuse to avoid electronic transactions.
Moreover, Olubunmi warned that the levy could deter the progress of the CBN’s cashless policy by making cash transactions seem more cost-effective compared to electronic transactions, which currently incur a separate levy.
Additionally, he noted that businesses might pass on the increased operational costs resulting from the levy to consumers, potentially leading to higher prices of goods and services.
President of Association of Corporate and Marketing Communication Professionals of Banks (ACAMB), Rasheed Bolarinwa, called for enhanced advocacy, communication and education on the cybersecurity levy directive to ensure that all stakeholders fully understood their obligations and responsibilities.
That, according to Bolarinwa, would include providing clear guidelines on how the levy will be applied, remitted, and exempted transactions.
He urged stakeholders to meet and discuss more on the implementation roadmap, among others, to reassure the citizenry following the robust discourse the announcements had generated among Nigerians of all classes.
Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, told THISDAY that the cybersecurity levy was an additional tax on businesses.
Ekechukwu said, “We have been complaining about how multiple taxation has adversely affected businesses. This is an additional and another version of tax.
“For a deposit of N100,000,000, the customer pays N500,000, and another N500,000 for withdrawing the same amount or transferring same, for example.
“There is another payment charged by banks called maintenance fee of 1 percent. There is also stamp duty charge.”
He said, “This is happening at a time when the inflation rate is as high as 33.2 percent, cost of diesel and fuel very high, exchange rate over N1,400 per dollar, standard of living is very low and hardship pervades every nook and cranny of the country.
“Bank customers are not supposed to fund expenses and responsibilities of banks.
“How is it the business of the government to watch over cyberspace? Let banks build enough ICT capabilities that can fight cyber insecurity.”
Chuks Okocha, Onyebuchi Ezigbo, Ndubuisi Francis, James Emejo; Dike Onwuamaeze, Nume Ekeghe, and Kayode Tokede
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