The federal government may have traded this year’s 95 per cent financial inclusion and the cashless economy drive, following the imposition of more taxes on electronic payments on which the ambitious goals rest their wings. Today, virtually all financial payments attract multiple taxes, a situation which experts said has increased the burden of survival by millions of poor Nigerians.
The controversial 0.5 per cent cybersecurity levy, which may generate as much as N3 trillion yearly, has added to dozens of charges Nigerians who settle their payment transactions online and register Nigeria as one of the countries with the costliest cost of banking.
Other charges imposed on electronic payments and related services are stamp duties, card maintenance charges, value-added tax (VAT) and SMS charges. The continual increase of the list, experts have warned, is tantamount to penalising Nigerians who opt for e-payment and is a major threat to the cashless economy and financial inclusion drive.
Indeed, there are exemptions to the cybersecurity levy such as 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, inter-branch transfers within a bank, letters of credits (LCs), savings and deposits including transactions involving long-term investments such government debt instruments and government social welfare programmes transactions.
Yet, the action, which has attracted widespread criticism, may stifle banking services, especially at the grassroots, and it is in contradiction of the Taiwo Oyedele’s Tax Reform Committee’s report, which has decried the multiplicity of taxes.
It is more worrisome that the 0.5 per cent cybersecurity comes without a cap, which suggests that the charge could run into several millions of naira for heavy transactions.
It can be deduced that it means that every time someone sends money electronically, a charge of 0.5 per cent is placed on the transferred amount, except for excepted items.
Economists said it would force people to resolve cash transactions, a possibility that would increase the volume of cash outside the banking system, which has exceeded 90 per cent. Consequently, with more cash transactions, banks will suffer, and individuals will be at higher risk of robbery and attacks from thieves.
The levy also means the cost of doing business will increase, leaving higher charges and unit prices. In sectors where prices are elastic, service providers and sellers may opt for cash transactions, which means an increase in demand for cash holding – a loss for banks.
Buttressing this point, the Science, Technology and Innovation (STI) Policy Advisor and Founder, Jidaw.com, Jide Awe, said although the 0.5 per cent cybersecurity levy on banking transactions has legal backing from the enactment of the 2024 Cybercrime (Prohibition, Prevention, etc) Amendment Act of 2024, it should come as no surprise to anybody. Awe noted that the convenience associated with electronic transactions is undeniable.
“But already consumers have complained and are not comfortable with the slew of banking fees they have to pay for their everyday transactions. The new cybersecurity levy further increases the operational costs of companies and increases the financial burden on individuals in an already harsh economic climate. This is also coming at a time when there have been calls by telcos to raise their tariffs. Timing is, therefore, a concern.
“This additional strain on organizations and individuals could lead to further price increases for consumers. However, and at the same time, won’t this continuous stream of electronic banking and financial charges slow the growth of cashless? The intention of the levy appears to be to provide funding for cybersecurity.
“Indeed, cybersecurity has become increasingly critical as digital adoption and diffusion grow nationwide. The goal, however, should be to improve the level of trust in the digital economy and the cashless environment,” he said.
Further, he said timeliness can also be looked at from the perspective of the urgent need to address the growing cybercrime threats, stressing that funding has always been a concern.
However, Awe said transparent management and utilization of the levied funds are crucial, saying regular evaluations are necessary to ensure the levy strengthens cybersecurity and serves its intended purpose.He added that meaningful stakeholder participation and contribution are critical. He said there are buy-in challenges already with how the levy implementation was introduced.
“Legal backing is essential but isn’t the only requirement for successful implementation of measures of this nature. The process and implementation must be properly managed to ensure it does not discourage cashless transactions and hinder technological development,” he stated.
In the stride, President Bola Tinubu’s administration has resumed stamp duty on mortgage facilities and charges on deposits above N500,000. That means three new (or reactivated) charges imposed on bank depositors in a space of two days.
All these are happening in the face of stagnant wages as negotiation for a new national minimum wage stalls. Industry watchers said the argument that the plan had been in place years ago is baseless and lame in the face of the daunting economic challenges.
The insertion of a levy of 0.5 per cent (0.005) equivalent to a half per cent of all electronic transactions value by the business specified in the Second Schedule of the Cybercrime (Prohibition, Prevention, etc) (Amendment) Act 2024 and under the provision of Section 4 (2)(a) of the Act is also confusing as there is no clarification on whether the charge should be 0.5 per cent or 0.005 per cent.
Economists, cybersecurity and technology experts have come hard on the FG for introducing the 0.5 per cent cybersecurity levy, maintaining that the levy is adding more burdens to Nigerians who are struggling to survive due to increasing economic pressures.
An economist, Kelvin Emmanuel, said: “While sections 44 of the 2024 amendment of the cybercrime prevention act specifies expressly a National Cybersecurity Fund (40 per cent) of which is supposed to be allocated to fighting violent extremism), it is important to realise that issuing a 0.005 electronic levy at a time when Nigerians are fighting 40 per cent food inflation and are barely making ends meet, does not show emotional intelligence on the path of the government.”
Querying why the CBN is administering the deduction instead of the Office of the National Security Adviser, he pointed out that Sections 44 (5-6) (a)(b) says that the Office of the NSA shall keep proper records and those records shall be audited by the auditor general of the federation.
While he said he understood the argument for secrecy and discretion as it regards the expenditure of items that constitute national security, and why it does not make sense to drag details of such expenditure in public probes, Emmanuel insisted that it is important to realise that the government could tax its way out of the economic challenges confronting the country.
Also commenting, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, described the levy as a major concern to economic agents.
“Businesses and the generality of citizens are yet to recover from the shocks of current reforms. Inflationary pressures have not abated, the high cost of living is still a major worry and operating and production costs for businesses remain elevated, amidst weak consumer purchasing power. This is not a good time to impose an additional levy both on businesses and citizens. The magnitude of the levy is an even bigger concern.
“Citizens and corporate organisations expect that taxes and levies are being rationalised and streamlined for a better business environment. The Presidential Committee on Fiscal and Tax Reforms had said this repeatedly. The announcement on the cybercrime levy contradicts earlier assurances by the presidential committee.
Meanwhile, businesses are already saddled with the following federal taxes: Company Income Tax, Tertiary Education Tax, Stamp Duties, NITDA levy, Value Added Tax, NASENI Levy, and Police Trust Fund Levy, among others. Still in the works are NYSC Levy and Tertiary Health Levy. There are also a plethora of taxes and levies imposed by states and local governments,” Yusuf said.
He said the cybercrime levy is even more troubling “because it is a tax on electronic transactions, not on profit” which has no regard to the health status of the businesses.
“Even loss-making companies are liable. The poorer segments of society are not exempted either. This raises serious issues of equity. There is also the issue of proportionality. That is relating the project objective to the amount of revenue being mobilised.
According to the Nigeria Interbank Settlement System (NIBSS), electronic payments on its platform in 2023 were N600 trillion. 0.5 per cent of this is N3 trillion.
“The industry data of electronic payments in 2022, according to the CBN website, was N1550 trillion. 0.5 per cent of this gives N7.75 trillion. Even if we discount these numbers for the exemptions provided in the law, what will be left would still be staggering,” he said, adding that it is difficult to rationalise spending that much on fighting cybercrime.
On his part, a financial analyst, Abubakar Umar, said the new tax will add to the already multiplicity of taxes bothering businesses with ease of doing business at risk. He argued that some of the decisions taken by Bola Tinubu’s administration were more politically motivated by basic economics as it is known.
“Some of these things are more political than economics, I can say that even inside the government, some people wouldn’t agree to such kind of hardship policies but because it’s a political issue, it will become a case of the more you look, the less you see. It’s a waste if the government cannot corroborate and implement the recommendations of the fiscal committee,” he explained.
He further held that the cybersecurity levy is a direct discouragement of cashless policy and people will avoid the banking system as far as they possibly can, saying, “This is a revenue that is supposed to be administered by the FIRS but it goes to an agency directly. You can see that all other taxes would go to FIRS at first before subsequent remittance to its agencies like the NITDA levy, education tax, etc. However, it is disappointing to create a revenue stream directly from customers’ transactions in addition to the existing charges like EMTL, Stamp Duty, etc. This is further creating distrust and making the poor not have any hope in the government.”
He further argued that Nigerians living in urban areas would be affected mostly while those in the rural areas will simply stay away from the financial inclusion space and this will affect the country’s monetary policy and other economic indices at large.
Uche Uwaleke, a professor of capital market at the Nasarawa State University, said 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 result is that it makes a difficult effort by the CBN to tame inflation,” he said.
Also responding, the President of the Lagos State Chapter of the Association of Certified Fraud Examiners (ACFE), Dr Titilayo Fowokan, said the levy should not have been introduced because already there is an electronic money transfer charged for bank lodgements.
“Why should customers be the ones to pay for cybersecurity when banks collect so many charges on banking transactions? This policy should not have come up since we already have a committee handling the Fiscal Policy and Tax Reform matters,” she said. She said since the CBN is represented in the committee, the levy should have been discussed within the committee.
Executive Director Civil Society Legislative Advocacy Centre, Auwal Ibrahim Musa (Rafsanjani), said it is unfortunate that the present administration has made it a policy inconsistent with its policies. He said a government that is preaching ease of doing business and a clement investment environment is doing everything possible to prove otherwise.
“Already the CBN is crying that a large chunk of the currency is outside the banking sector and it is introducing charges that will further scare people from going to the banks,” he said.
Speaking with The Guardian, the Chairman of Mobile Software Nigeria, Chris Uwaje, said positively, it means increased investment in cybersecurity infrastructure and talent development; enhanced protection for mobile users against cyber threats and a potential revenue stream for the government to support cybersecurity initiatives.
From his base in the USA, the CEO, Allen Forensics Inc., a US-based Cyber Risk Advisory Firm, Ben Allen, told The Guardian that the levy under the Cybercrimes Act 2024 is a necessary step toward strengthening Nigeria’s national cybersecurity infrastructure.
He said by funding cybersecurity initiatives directly, we can enhance our defenses against increasingly sophisticated cyber threats, saying the levy is designed not just as a financial measure but as a commitment to upholding the security of digital transactions and protecting sensitive information.
Allen noted that this proactive approach is critical in a world where cyber threats are constantly evolving and can have severe implications for both the economy and individual privacy.
“The timing of the levy is particularly appropriate given the current global and local cybersecurity landscape. With the rise in cyberattacks globally, including significant incidents that have impacted major economies, Nigeria must bolster its cybersecurity measures now. As our economy continues to digitize, from mobile banking to online government services, securing our cyberspace is not just timely but urgent. The timing aligns with these needs and reflects a responsive approach from the government to protect its citizens and institutions effectively,” he stated.
Looking at the implications of the Cybercrimes Act 2024 for Nigeria and how other nations are addressing similar challenges, Allen noted that globally, countries are recognising the critical importance of funding cybersecurity initiatives to protect their digital infrastructures.
For example, he said in the United States, the Cybersecurity and Infrastructure Security Agency (CISA) receives substantial federal funding to protect national infrastructure. He added that in the European Union, cybersecurity is a major focus of the Horizon Europe programme, which allocates billions of Euros to enhance cyber defenses and promote innovation.
The cyber security expert said South Korea and Israel are also notable examples, stressing that South Korea’s investment in cybersecurity is integral to its digital economy strategy, ensuring the safety of its technology infrastructure.
He said Israel supports its status as a global leader in cybersecurity innovation through government funding and initiatives aimed at nurturing startups in the cybertechnology sector.
“These examples highlight that the approach taken by Nigeria, through the Cybercrimes Act 2024, aligns with global best practices. Investing in cybersecurity is not just about protecting national interests but also about fostering a secure, stable environment that can drive economic growth and development. This kind of investment is crucial as it not only safeguards against immediate threats but also builds the foundation for a resilient digital future.
“It is important for us to view the provisions of the Cybercrimes Act 2024, such as the proposed cybersecurity levy, as steps towards strengthening our national and economic security. By doing so, Nigeria is taking proactive measures to ensure a secure digital landscape, which is essential for our ongoing progress and alignment with global digital economy standards,” Allen added.
Meanwhile, lawyers have queried the legality of the Office of NSA and where it derives its powers on the issue. While some maintained that it is legal, others argued that there is no law creating the Office of the NSA, calling for amendments to fix the gaps inherent in the National Security Act.
Reacting, Abuja-based lawyer, Abubakar Sani about the provisions of the Cybercrime Act, stated that Nigerians are victims of poor draftsmanship and indifference by both the governed and the government.
According to him, the Cybercrimes (Prohibition, Prevention, Etc) Act was passed into law in 2015, where section 44 established a fund to be known as the National Cyber Security Fund.
Section 44(2a), he said, imposes a levy of 0.005 on all electronic transactions by the businesses specified in the second Schedule to the Act.
“The first error I noticed is the one stating the levy to be paid as ‘0.005’. No percentage was added to this figure. 0.005 per cent of N1million is N50 whereas 0.005 of N1m is N5,000. It is inconceivable that the government wants to take a flat rate of N5,000 for every N1 million.
“I suspect that the draftsmen made a terrible blunder, and our National Assembly members, with their humongous allowances for aides, never saw this.
“The President who signed the Bill into law did not see it. Our army of do-gooders NGO didn’t see it. The law is nine years old, but a few days ago, the NSA urged that the provisions of the Act be implemented and the CBN came out with its circular asking banks to deduct 0.005 or half-per cent on all electronic transfers done by banks,” he explained. He stressed that the law must be urgently amended.
On the legitimacy of the office of the NSA, Sani argued that it is given legal recognition with immense powers. He argued that the law that empowers the President to appoint Special Advisers covers the portfolio.
This, he said, gives the President the discretion to designate or assign portfolios to his advisers as long as they are pre-approved by the National Assembly.
Sani stated that the National Security Agencies (NSA) Act of 1986 is consistent with the Constitution having been expressly retained by Section 315(5)(c) of the 1999 Constitution.
Also, former Publicity Secretary of the Nigerian Bar Association (NBA), Kunle Edu, declared that the NSA Act created the position of National Security Adviser.
The Act, he said, was passed to disband the Nigerian Security Organisation and to create three security agencies, charging each with the conduct of the relevant aspect of national security and other related matters.
Though he agreed that the words used by the Act are “Principal Staff Officer or Co-ordinator on National Security, Edun suggested that there should be an amendment to those portfolios to reflect the nomenclature Presidents prefer to call their appointees.
“That is the bane of Nigeria. We like to change the exact name of things written in the law. For instance, this law created SSS but they have changed it to DSS. We should not be surprised someday if a headstrong judge declares that DSS is unknown to law and uses it to free a notorious criminal if they continue to use DSS.
“I think that the National Security Agencies Act needs to be amended to accommodate the exact words the Presidents prefer to use for their security coordinators, “ he declared.
But activist lawyer, Festus Ogun also argued that such an office is not expressly created in the law cited by his colleagues. Ogun, who queried why an office not created by law should be mandated to collect the deducted cyber security levy, insisted that what is created under Section 4(1) of the NSA Act, is “Coordinator on National Security” and nothing more.
“There is no such thing as ‘Office of the National Security Adviser’. It is like saying that the DSS is created by law. There is no such thing. What was created by law is the State Security Service (SSS), not the Department of State Security,” he declared.
For Gabriel Airewele, a Lagos-based lawyer, the legality of the office of the National Security Adviser is something the National Assembly should have considered at the time the law was being debated and passed.
