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Nigeria introduces 0.5 percent e-levy

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The Nigeria government has introduced a 0.5% electronic transaction tax to raise money in support of cybersecurity in that country, and this has angered lots of Nigerians.

In a memo, the Central Bank of Nigeria (CBN) ordered all commercial banks to impose a 0.5% levy on some electronic transactions. The fund is supposed to be transmitted to the Office of the National Security Adviser for the purpose of cyber security. The levy is imposed on the initiator of the transaction and not the receiver.

“The levy shall be applied at the point of electronic transfer origination, then deducted and remitted by the financial institution. The deducted amount shall be reflected in the customer’s account with the narration, Cybersecurity Levy,” the memo read, adding that it is in line with the new cybercrime law signed by President Bola Tinubu in February.

The enforcement of the law is expected to take effect in two weeks. The directive, however, lists 16 exemptions. A bank transfer between two customers of the same bank will not incur the levy. A transfer of funds by an account holder to another one of his accounts in another bank will not be charged.

Other exemptions include:

  • Loan disbursements and repayments
  • Salary payments
  • Other Financial Institutions instructions to their correspondent banks
  • Interbank placements
  • Banks’ transfers to CBN and vice-versa
  • Inter-branch transfers within a bank
  • Cheque clearing and settlements
  • Letters of Credits
  • Banks’ recapitalisation-related funding – only bulk funds movement from collection accounts
  • Savings and deposits, including transactions involving long-term investments such as
  • Treasury Bills, Bonds, and Commercial Papers
  • Government Social Welfare Programmes transactions, e.g., pension payments
  • Non-profit and charitable transactions, including donations to registered non-profit organisations or charities
  • Educational institutions’ transactions, including tuition payments and other transactions involving schools, universities, or other educational institutions
  • Transactions involving banks’ internal accounts, such as suspense accounts, clearing accounts, profit and loss accounts, inter-branch accounts, reserve accounts, nostro and vostro accounts, and escrow accounts.
  • One of many charges imposed

The latest levy is just one of many charges imposed on bank customers. There is the stamp duty, the Nigerian Inter-Bank Settlement System (NIBSS) charge, and the Value Added Tax. This is apart from the charges imposed by banks like the maintenance fee and the SMS charges.

A 2023 report by EFInA, a UK government-backed firm, stated that about 64% of adult Nigerians use formal financial services including bank accounts, insurance and mobile money. It said only 52% have a bank account, a development it attributes to poverty.

Last year, NIBSS, jointly run by the CBN and commercial banks, slashed its transaction processing fee for NIBSS interbank Instant Payment from N5 to N375,000 ($274) to promote financial inclusion.

Activists argue that this latest levy could slow any progress made in the race for financial inclusion. They maintain that this multiplicity of charges and levies could discourage more people from joining the formal financial system.

Threats to go to court

Many Nigerians have rejected the new law with some threatening to go to court, wondering how the law was passed without public consultation.

Pro-transparency advocacy group, SERAP, which has instituted dozens of cases against the government in court, said on X that it would sue the government over this new law.

“The Tinubu administration must immediately withdraw the grossly unlawful CBN directive to implement section 44 of the Cybercrime Act 2024, which imposes a 0.5% ‘cybersecurity levy’ on Nigerians. We’ll see in court if the directive is not withdrawn within 48 hours,” it said, adding that it contravenes an order by the ECOWAS court of justice.

Levy adds insult to injury

For many Nigerians, the levy only adds insult to injury. Since Tinubu took office a year ago, inflation has risen to unprecedented heights due to his decision to remove the petrol subsidy and devalue the currency which ultimately affected the cost of production, goods and services.

Food inflation currently stands at 40.1% while the general inflation is 33%. The central bank has increased interest rate twice this year all in a bid to tame inflation but this has hindered economic growth.

The electricity tariff for one category of Nigerians was increased by about 300%, for example. The telecommunications tariff is expected to rise soon.

In a bid to boost revenue, the Tinubu administration has either introduced new taxes or begun an aggressive implementation of tax laws that were hitherto suspended. The move is similar to Tinubu’s style when he was the governor of Lagos.

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