… concerns raised over economic impact
The announcement of a 0.5 percent cybersecurity levy on electronic transactions by the Central Bank of Nigeria (CBN) has continued to spark widespread concern among businesses and citizens, with industry leaders expressing apprehension over its potential economic implication.
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), has voiced deep concern over the directive. In a statement released on Tuesday, Yusuf noted the challenges faced by businesses and citizens amidst ongoing economic reforms, citing inflationary pressures, high living costs, and elevated operating expenses as key concerns.
Yusuf was concerned about the timing of the levy imposition, given the current economic climate characterized by weakened consumer purchasing power. He noted that businesses are already burdened with a multitude of federal taxes and levies, making it challenging to stimulate economic growth and job creation.
Of particular concern is the nature of the cybercrime levy, which applies to electronic transactions regardless of a company’s profitability. Yusuf pointed out that even loss-making companies and economically disadvantaged individuals would bear the brunt of this levy, raising questions of fairness and equity.
Furthermore, Yusuf questioned the proportionality of the levy, citing industry data that suggests the potential revenue generated could far exceed the budget allocations for defence and infrastructure combined. Such disproportionate spending on cybersecurity raises doubts about the effectiveness and necessity of the levy.
The CPPE CEO also raised concerns about the potential impact of the legislation on the Central Bank’s cashless policy, warning of a possible reversal in the progress made towards promoting electronic payments.
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In light of these concerns, Yusuf urged relevant authorities to suspend the implementation of the levy and initiate a comprehensive review process. He proposed extensive stakeholder engagement to ensure that the legislation aligns with the interests of businesses, citizens, and investors.
Uche Uwaleke, professor of Capital Market at the Nasarawa State University Keffi, said, “I think the cybersecurity levy is ill-timed, coming at a time when the CBN is concerned about the high rate of financial exclusion and the increasing rate of currency circulating outside the banks.
He said it carries the downside risk of discouraging financial intermediation as well as complicating the transmission of monetary policy with more people shunning the banks due to high charges. The result is that it makes a difficult effort by the CBN to tame inflation.
“So, I think the circular should be withdrawn especially against the backdrop of assurances by the government that its plan to increase revenue would not include introducing new taxes or increasing tax rates. To this end, the government should suspend the policy while getting set to implement the recommendations of the Presidential Committee on Fiscal Policy and Tax Reforms whose mandate includes streamlining multiple taxes and levies currently inhibiting the growth of businesses in Nigeria, Uwaleke said.
Nigerians have taken to social media to express their concerns and opinions regarding the levy.
Usman Yola, an X user stated that the implications of the levy run deep for business owners and entrepreneurs who deal with large volumes of money daily.
Read also: CBN imposes 0.5% cybersecurity levy on electronic transfers
“The implications are huge for business owners who run low-margin/high-turnover businesses. After negotiating hard with our banks to waive the 0.1% account maintenance fees, then you are hit with this policy. Preserving margins in this country is hard work. I am just tired,” he said.
Likewise, Victor Onwunna, another X user questioned the levy’s impact on Nigerians, stating that people in the middle class will be more impacted than other people in the society.
“This matters when it touches the middle class because the upper and lower classes of society won’t be affected much. The upper class can afford to pay it comfortably because they’ve multiple sources of income, while the lower class deals mainly with physical cash.
But the middle class is where the real impact is felt. We can’t all just be comfortable paying an extra 0.5 percent on the money we’re working so hard without understanding how it improves our lives and the economy at large,” he said.
Sanusi Dantata said that the government should pause the levy owing to the difficult situation Nigerians have already been put in.
“The cybersecurity levy needs to be shelved for now. Asking people to pay more when they’re already facing serious financial challenges, high inflation, & other forms of hardship is too harsh. I hope the Federal Gov’t and Cardoso rethink the implementation of this policy,” he said.
Usman Shamaki said that the move will prevent Nigerians from adopting the cashless banking policy introduced.
“Policy implementation in Nigeria is so topsy-turvy. You want people to embrace cashless banking. Rather than incentivise them to do so, you create penalties that hinder the acceptance of cashless banking. What exactly is the point of this 0.5 percent cybersecurity levy?” he stated.
Likewise, Umar Amir Abdullahi said that the directive would discourage petty traders from seeking financial inclusion.
“How does this policy encourage a petty trader in a small village whose entire capital is less than 50k to seek financial inclusion? He will add those levies for a year and decide he is better off keeping his hard-earned money outside the banking system,” he said.
