The Nigerian Economic Summit Group (NESG) has said the controversial cyber security levy that was recently introduced by the federal government is mistimed, introduced amidst national cost of living crisis exacerbated by rising inflation, should be targeted at high-net-worth individuals and a specific amount transferred electronically to allay the fears of the populace. It said the policy shouldn’t have been introduced at the current time when Nigerians are still battling skyrocketing food and non-food prices
NESG said it will further expand financial exclusion and increased currency in circulation. It said if the policy remains, several Nigerians will boycott electronic funds transfers, which does not even bode well for the government due to revenue loss from electronic transfer levy.
The Central Bank of Nigeria (CBN) had directed banks to begin charging 0.5 percent (equivalent to 0.005) cybersecurity levy on all electronic transactions value as specified in the Cybercrime Act, section 44(2)(a). The levy was introduced to curtail heightened cyber threats and boost cybersecurity infrastructure to protect Nigerians against cyber threats.
“The NESG, however, feels this is a critical time to implement such a policy. The impacts of the fuel subsidy removal, exchange rate reform, and, most recently, the removal of electricity subsidies still permeate the operating costs of businesses and citizens’ welfare.
“The government must be cautious of the numerous strenuous policies that stiffen the purchasing power and welfare of corporations and individuals. Therefore, the government needs to properly sequence reforms for efficient socioeconomic outcomes, especially those that strain the people,” the NESG said in a statement on Thursday.
The policy is coming when the Presidential Committee on Fiscal Policy and Tax Reforms is yet to finalise its mandate. Based on that, NESG said to avoid conflict of interests and ensure no policy misalignment, the levy should be deferred and proper consultation until the fiscal policy committee deems it necessary to implement it.
It said the CBN needs to be proactive in monitoring banks’ implementation to curb citizen exploitation. With the exemption provided, we anticipate that there will still be overlapping transactions. To that effect, it urged monetary authority to develop an effective and practical framework to limit the levy to liable transactions.
“Higher revenue should be achieved without imposing severe burden on poor and vulnerable Nigerians. Meanwhile, the policy could also create loopholes for cybercriminals to devise alternative routes to perpetrate the heinous acts. To narrow the alternative ways of committing cybercrimes, the NESG posits an integrated approach in the fight against cybercrimes involving the collaborative efforts of financial institutions, security agents, the EFCC and other key stakeholders. Hence, introducing a cybersecurity levy penalises the populace for the failure of the system to uproot the sources of cybercrimes.
“The cybersecurity levy needs to be reconsidered, considering the CBN’s concern about the high rate of financial exclusion and increased currency in circulation. At the NESG, we are concerned that implementing this policy at this critical time will decelerate the pace of achieving the 95 percent financial inclusion target of 2025. The mere news of charges on bank transactions will demotivate many Nigerians from accessing financial services, potentially propelling a surge in the demand for cash,” NESG stated.
The cybersecurity levy adds to the list of levies and taxes collected by financial institutions on behalf of the government, including stamp duty, electronic transfer levy, and VAT. Experts believe that this embodiment of taxes increases the transaction costs of using a bank and could disrupt the financial intermediation role of banks.
It stated that given the current strains that citizen face, perceived unfairness, lack of transparency and accountability would heighten distrust in the financial system.
The NESG, suggested the need to reduce banks’ transaction costs, signal clarity to improve trust in the financial system and to entice people to become financially included.
