CEM INSIGHT, FINANCE| Nigeria’s recent foray into fortifying its cybersecurity landscape with a 0.5% levy on electronic transactions has stirred a national conversation. While the cybersecurity levy’s intent to bolster the nation’s digital defences is clear, its impact on citizens and businesses has ignited debate. However, a closer look reveals a list of exempted transactions, offering some relief for specific categories.
Mandated by the Cybercrimes (Prohibition, Prevention, etc.) (Amendment) Act 2024, the levy applies to a broad spectrum of electronic transactions. Banks and other financial institutions act as collection points, deducting the levy at the transaction’s origin. The collected funds are then deposited into the National Cybersecurity Fund (NCF) overseen by the Office of the National Security Adviser (ONSA).
According to a 2023 report by PwC, Nigeria witnessed a 34% increase in cyber-attacks compared to the previous year. This alarming trend underscores the urgency of fortifying cybersecurity measures. The levy, proponents argue, is a crucial step towards achieving this goal.
Transactions Spared the Cybersecurity Levy
While the initial announcement raised concerns about a blanket levy, a closer examination reveals exemptions for specific transactions. Here’s a breakdown of some key exempt categories:
Essential Transactions: Loan disbursements and repayments, salary payments, and intra-account transfers (both within the same bank and between different banks for the same customer) are exempt. This exemption aims to minimize the levy’s impact on basic financial activities.
Government and Public Services: Transactions related to government social welfare programs (e.g., pension payments) are exempt. Additionally, non-profit and charitable transactions, including donations to registered organizations, are not subject to the levy. This ensures that essential social services and charitable giving remain unaffected.
Education Sector: Educational institutions’ transactions, including tuition payments and other school-related activities, are exempt. This exemption fosters the continued growth and accessibility of digital financial services within the education sector.
Internal Bank Operations: Transactions involving a bank’s internal accounts, such as suspense accounts, clearing accounts, and inter-branch accounts, are not subject to the levy. This exemption ensures the smooth functioning of internal banking operations.
Financial Instruments: Savings and deposits, including transactions involving long-term investments like Treasury Bills, Bonds, and Commercial Papers, are exempt from the levy. This exemption protects investment activities and encourages long-term financial planning.
If You Ask Me
Truly, like I’ve said before, I support the levy, the benefit is in the long term is worth looking out for, however, this levy seems set out against daily transactions.
It is pivotal to state that the levy doesn’t apply to the receiver but to the source of the transaction. The levy isn’t deducted from the transaction sum but the balance (just as transfer fees).
The federal government during the cash crunch crisis pushed for more cashless transactions, with businesses embracing this means and financial inclusion growing, this levy may impede the growth. This levy may eventually (as I have said before) push for cash transactions as it comes with no or one single charge.
If the market woman accepts transfer (thanks to fintech) and I choose to go to the market cashless but with my phone, I’ll pay 0.5% for every transaction in the market that day.
Critical looking at the exempted list, it looks more like the government and institutions are in the safe space. The only safe space for the citizens is the intra-account transfers (both within the same bank and between different banks for the same customer), does this mean Nigerians would have to open accounts with every bank just to bend around the levy? That is “almost” impossible, especially with the knowledge that some banks can have downtime just when you need a transaction to go through.
According to the CBN, merchant, non-interest, payment service banks, mobile money operators, microfinance banks, primary mortgage banks, and development finance institutions are financial institutions that will deduct the cybersecurity levy. The above implies that fintech is in the queue to deduct the cybersecurity levy
The Debate Continues
While the existence of exemptions offers some comfort, concerns remain. “The levy adds another layer of burden on Nigerians already grappling with rising inflation,” stated Akinsola, a Lagos-based business owner. “This could discourage people from using digital transactions, hindering the cashless economy’s growth.”
Transparency also remains a key issue. “The exact details of exempt transactions and the criteria for essential retail purchases need further clarification,” said Afolabi, a financial analyst. Additionally, concerns linger regarding the management and allocation of funds from the NCF. “Clear oversight is crucial to ensure the funds are used effectively for cybersecurity improvements,” she emphasized.
Read Also: New 0.5% Cybersecurity Levy on Electronic Transfers in Nigeria: What You Need to Know
If You Ask Me Again
The implementation of the cybersecurity levy marks a significant step towards strengthening Nigeria’s digital defences. However, the success of this initiative hinges on several factors. Effective communication to all stakeholders about the levy’s purpose and scope is crucial.
Clear and well-defined exemptions are essential to minimize the levy’s impact on essential activities and vulnerable groups. Finally, transparent management and oversight of the NCF are paramount to ensure that collected funds are used effectively for their intended purpose – fortifying Nigeria’s cybersecurity landscape.
Only time will tell if the levy strikes the right balance between bolstering cybersecurity and fostering a healthy digital economy in Nigeria. As the nation navigates this new landscape, open communication, clear exemptions, and transparent management will be critical factors in its success.
