Nigeria’s Cybersecurity Levy: Doing More Harm than Good?

While the cacophonous debates about the Tax Reform Bills are ongoing, the Federal Government of Nigeria (FGN) has since stealthily commenced the enforcement and collection of the controversial Cybersecurity Levy it suspended early in the year. The Levy was first introduced by the FGN through the Central Bank of Nigeria (CBN) in May 2024, pursuant to the Cybercrime (Prohibition, Prevention, etc.) Act 2015. It was however quickly suspended, as it generated so much public angst, criticism and opposition.

The Cybersecurity Levy, according to the CBN, is a 0.5% tax on all electronic transactions, aimed at raising fund for boosting cybersecurity infrastructure and protecting Nigerians against cyber threats. The levy applies to all electronic transactions, including those made by banks, mobile money operators, and payment service providers.

The levy which faced stiff opposition from the general public and specific critical stakeholders, was promptly stopped; and the Government promised to rework its implementation strategy. However, surreptitiously, the apex bank, just before the sustained opposition and resentment to the Tax Reform Bills now with the National Assembly, had re-instated the Cybersecurity Levy.

Since the month of October 2024, not a few persons have reported the effecting of “FGN Electronic Money Transfer” deductions from their accounts, each time they send/pay money electronically. These deductions (also experienced by this writer) have rather looked arbitrary; and ranged from N100 to some thousands of naira per transaction.

An official of the Bank Customers Association of Nigeria (BCAN) who spoke with this writer on the subject, confirmed noticing such deductions in his own accounts by his bank—one of the tier-one banks. The ABCAN official (who opts not to be named) also confirmed reports and complaints already lodged by some of their members regarding the strange tax and its arbitrariness.

The latest levy by banks on electronic transactions is in addition to some other existing charges—such as NIP Charge plus Value Added Tax (VAT), ranging from N50 to N100; Card issuance fee (N1000 to N3000); Card maintenance charge (N500 to N1000), etc.

One of the critical stakeholder-groups that kicked against the Cybersecurity Levy when it was first introduced in May 2024 was the Nigerian Economic Summit Group (NESG) which expressed concerns about the timing and implementation of the Levy. The NESG was particularly worried about the potential impact of the levy on financial inclusion drive, and the economy generally.

The NESG argued that the Cybersecurity levy could lead to increased transaction costs, reduced financial inclusion, and decreased economic growth. The NESG therefore called for “a more targeted approach”, suggesting that the levy should be applied only to high-end individuals and specific transactions.

Apparently in tune with the NESG’s stance, the CBN altered the Cybersecurity levy rate from 0.5% to 0.005% in its fiscal guidelines for 2024-2025. And notwithstanding the stiff resistance to the levy all along, the CBN has continued with the levy under the revised rate, as part of its new monetary and exchange policy.

Although the FGN has finally discretely commenced the implementation of the Cybersecurity levy (though at reduced rate) it remains curious that the Cybersecurity Act 2015 which had been dormant, must be ‘activated’ at a time of so much economic instability and misery. The very poor economic situation, high inflationary spiral and hardship as feared by the NESG have not abated in any appreciable manner.

Particularly, inflation which has eaten up the purchasing power of the citizenry was at 34% in May 2024 when the Cybersecurity levy was introduced, the rate has hit almost 35% by end-November 2024. Also, while the average Naira exchange rate against the dollar in May 2024 was about N1530/$, it has deteriorated to an average of N1700/$ by mid-December 2024.

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The deterioration of these indicators translate to impoverishment of the citizenry, and worsening of their economic condition. Therefore, the imposition of more taxes on the people, no matter how insidiously, means further depressing of their livelihood and wellbeing. It is even anachronistic for the FGN to be pursuing financial inclusion and be imposing levies on Internet/Digital (banking) transactions simultaneously.

For over a decade, the CBN has been implementing financial inclusion policy—aimed at improving the availability and accessibility of financial services to all individuals and businesses in the country. This is regardless of their income level, geographic location, or social status.

The Cybersecurity Levy (on electronic transactions) is therefore a direct counterpoise to the banking inclusion drive—as it is an additional cost to the people. The levy works against banking (services) penetration, in favor of financial exclusion—leaving more people without access to formal financial services.

All these get more worrisome when it is noted that there has been a National Financial Inclusion Strategy (NFIS)—aimed at increasing financial inclusion in Nigeria. This, apparently, was why the Cybersecurity Levy plank of the Cybercrime (Prohibition, Prevention, etc.) Act 2015 has been kept in abeyance by successive Governments until the President Bola Ahmed Tinubu administration.

Under the NFIS, the CBN has licensed several mobile money operators to provide financial services to the unbanked and underbanked populations. The apex bank has also introduced agent banking to increase access to financial services in the rural and underserved areas.

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The CBN and other stakeholders have since launched financial literacy programs to educate Nigerians on the importance of financial inclusion and how to access financial services. The Cybersecurity levy which now tax people that get financially included is, without an iota of doubt, a huge disincentive to financial inclusion.

Apparently at its wits end on revenue generation, the Tinubu-led administration has kept combing all nooks and crannies, taxing Nigerians even as the economy keeps wobbling. This, obviously, accounts for why most Nigerians now prefer to have their business transactions in cash: a direct opposite of the ‘cashless economy’ mantra.

Ironically, even the cash has been made scarce—by a collusion of the CBN, the deposit money banks (DMBs) and the Point-of Sale (PoS) operators. The apex bank has suddenly become a toothless bulldog, barking out endless threats to the banks, as they connive with other players in selling banknotes to the public.

The upshot of this has been the return of the era of huge crowds and “tally numbers” in most banking halls across the country. Not a few persons get frustrated on a daily basis desperately seeking to access cash for their business transactions. Coincidentally, the CBN has barely been watching as practically all Automated Teller Machines (ATMs) everywhere in Nigeria now remain ‘empty boxes’.

As the Yuletide sets in, the apex bank has even placed a limit of one hundred thousand naira on the cash that a customer can access through the PoS in a day. The DMBs, on their part, have each placed a limit of not more than twenty or fifty thousand naira cash that can be withdrawn by a depositor in one day.

All these go to show the desperation and preference of most bank customers to now access, carry, and do business in cash, as against electronic transactions. Although this predilection may not be entirely due to the impact of the Cybersecurity levy, the hike in transaction costs embedded in the taxes, fees and charges of the DMBs have become a disincentive to electronic/digital banking.

This is why when the Cybersecurity levy first came into place in May 2024, it was widely described as “one more tax too many.” This suggests that there have been so many other taxes before its addition: thus, increasing the burden of too many taxes and levies on the people. But, truly, Nigerians now need their economic burdens lightened. Obviously, not through palliatives!

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• The author, Okeke, a practicing Economist, Business Strategist, Sustainability expert and ex-Chief Economist of Zenith Bank Plc, lives in Lekki, Lagos. He can be reached via: [email protected] (08033075697) SMS only