CEM REPORT, FINANCE| The Central Bank of Nigeria (CBN) has announced a new 0.5% cybersecurity levy on electronic transfers, effective in two weeks. This move aims to raise funds for bolstering the country’s cybersecurity defenses in the face of increasing online threats.
The CBN’s directive, outlined in a circular signed by Chibuzor Efobi (payments system management director) and Haruna Mustafa (financial policy and regulation director), emphasizes compliance with the Cybercrimes (Prohibition, Prevention, Etc.) Act 2015 and its recent amendment, the Cybercrime (Prohibition, Prevention etc) Amendment Act of 2024.
Levy Details and Fund Management
The 0.5% levy, as stipulated by Section 44 (2)(a) of the amended Act, will be collected on the value of all electronic transactions conducted by businesses specified in the Act’s Second Schedule. These collected funds will be deposited into the National Cybersecurity Fund (NCF) managed by the Office of the National Security Adviser (ONSA).
The CBN circular clarifies the collection and remittance process:
Deductions will begin within two weeks of the circular’s issuance (around May 20th, 2024) for all financial institutions.
Banks and institutions must collect the levy and remit it in bulk to the NCF account at the CBN by the 5th business day of each subsequent month.
Exemptions from the Cybersecurity Levy
While the levy applies broadly to electronic transfers, it excludes certain transactions to minimize the impact on individuals and specific financial activities. Here’s a breakdown of exempt transactions:
Loan disbursements and repayments
Salary payments
Intra-account transfers (within the same bank or between different banks for the same customer)
Inter-branch transfers within a bank
Cheque clearing and settlements
Letters of Credit
Banks’ recapitalisation-related funding (bulk funds movement)
Collection accounts
Transactions involving savings and deposits, including long-term investments, are also exempt from the levy.
Public Response and Potential Impact
The announcement of the cybersecurity levy has generated mixed reactions from the public. Some citizens applaud the initiative, recognizing the importance of cybersecurity investments. However, others express concerns about the potential impact on businesses and individuals, particularly those who rely heavily on electronic transactions.
The Nigerian Economic Summit Group (NESG) has called for transparency in the management of the NCF and urged the government to ensure the funds are used effectively to strengthen cybersecurity infrastructure and improve public awareness of cyber threats.
Impact on Businesses and Consumers
The levy’s impact on businesses and consumers will depend on the frequency and size of their electronic transactions. Businesses heavily reliant on electronic payments may see a slight increase in their operational costs. However, the levy is a small percentage (0.5%) and might be absorbed by some businesses.
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For individual consumers, the impact is likely to be minimal, especially for those with infrequent or low-value electronic transactions. However, for individuals who heavily rely on digital payments for daily needs, the cumulative effect could be noticeable.
If You Ask Me
The success of this levy hinges on clear communication and transparency from both the CBN and financial institutions. Banks need to effectively inform their customers about the levy, its exemptions, and the calculation process for the charged amount. Additionally, the CBN should ensure the collected funds are used efficiently and transparently for their intended purpose – strengthening Nigeria’s cybersecurity infrastructure.
The new cybersecurity levy presents a trade-off between raising funds for cyber defense and potentially increasing the cost of electronic transactions. While some may experience a slight financial burden, the potential long-term benefits of a more robust cybersecurity ecosystem could outweigh the initial costs. The key lies in transparent implementation, efficient fund utilization, and ongoing evaluation of the levy’s effectiveness in achieving its cybersecurity goals.
However, from where I sit I wonder what impact this will have on financial inclusion and cashless economy? If we have to pay for each transaction, why not return to cash transactions? If this happens what happens to investment in electronic transfer structure?
While I throw my weight behind the Cybersecurity Levy, why not the CBN implement a wholesome charge on all transactions than charge per transaction. Well this is just my thought, leave yours in the comment section.
