President Bola Tinubu made one right decision amidst many wrong turns in ordering a halt to implementing the noxious cybersecurity levy the Central Bank ordered on May 6. The Federal Government read the nation’s mood correctly with the directive, even as purists note how it undercut the Central Bank’s independence. The government needs to do more to restore its reputation and goodwill, which are negatively impacted by a rash of decisions that show preference for the government’s welfare over the welfare of citizens.
The imposition of a cybersecurity levy in Nigeria to fund cybersecurity efforts sparked a severe controversy. The controversy focused on the levy’s downsides and effect on inflation and the cost of living, amidst other policies that negatively affected citizens. The timing and manner of the levy’s imposition needed to have allowed for a holistic appreciation of the measure’s positives and negatives.
“Experts recommend that the apex bank invite broader discussions on policy options before implementing them.”
We look at the potential benefits and drawbacks.
The levy could generate a dedicated funding source to improve Nigeria’s cybersecurity infrastructure, technologies, and personnel, resulting in increased investment in cybersecurity. More robust cybersecurity can protect businesses and government institutions from cyberattacks that disrupt operations and damage the economy.
It could reduce cybercrime. A more robust cybersecurity posture could deter cybercriminals and mitigate financial losses from cybercrime, creating a more secure environment for businesses to operate and invest in.
It could enhance digital transformation. Improved cybersecurity can bolster trust in digital transactions, potentially leading to greater adoption of e-commerce and other digital services to drive economic growth.
There are many potential drawbacks besides those experts and citizens have pointed out.
The foremost is the increased cost of doing business. The cybersecurity levy adds another layer of taxation to businesses, potentially reducing profits and hindering investment. Such an additional burden could harm small and medium-sized enterprises (SMEs).
The levy discourages financial inclusion. It might prevent electronic transactions and slow down the progress of financial inclusion efforts in Nigeria. The monetary authorities have pushed for greater citizen engagement in digital banking and e-commerce for years, but the levy could dampen enthusiasm.
A further risk is that the levy revenues might need to be used more effectively to improve cybersecurity. Concerns exist about transparency and accountability in government spending.
The net effect of the cybersecurity levy on economic growth is still being determined. While improved cybersecurity can create a more secure and stable environment for businesses, the levy might disincentivize some financial activities.
Lawyers have pointed to the levy’s illegality. The office of the National Security Adviser is not an authorised receiver of public funds, as the levy purports to make it.
One year after its establishment raised hopes, the Presidential Fiscal Policy and Tax Reforms Committee has yet to revert on its promise to prune down Nigeria’s multiple taxation. Businesses and citizens grapple with about 66 taxes in various forms. The committee promised to streamline and eliminate most of them.
Therefore, the cybersecurity levy was a surprise. Businesses looked forward to positive taxation steps rather than an additional one with a highly disruptive effect.
BusinessDay recognises the dire straits of the Nigerian economy and the government’s efforts to seek ways to bolster revenues. Additional taxes, such as the Cybercrimes Levy, do not cut it. Such taxation amounts to scraping the bottom of the barrel instead of adding to fill the pot.
When heads cool, the Central Bank should consider several policy options to get Nigeria out of the hole. Experts recommend that the apex bank invite broader discussions on policy options before implementing them. Involve more experts and representation.
The design of the levy should be reconsidered. Should it be a general levy payable by every bank customer or a well-designed levy with tiers based on company size or revenue to mitigate the impact on smaller businesses and remove the focus on citizens?
We must emphasise the importance of transparency and accountability for the funds. The Office of the National Security Adviser is not renowned for fund accountability. Instead, it is designed for secret operations, including fund management. How could such an agency take funds from citizens?
Nigeria must explore alternative funding mechanisms for cybersecurity. They include public-private partnerships to complement the levy and reduce the burden on businesses.
The withdrawal of the memo on implementing the levy offers an opportunity for cool heads and careful examination. Even if it is academic, the starting point should be whether we need such a fund as stipulated in the Cybercrimes Act (2015.2024). Are there no other funding sources, such as those within the general security establishment or relevant ministries? Careful consideration of its design, implementation, and transparency is essential to maximising the impact and minimising the negatives of a cybercrime levy.
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