• Monday, May 27, 2024
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BusinessDay

Cybersecurity levy seen stunting e-payment growth in Nigeria

PoS, cheque usage falls on bank transfers’ surge

Nigeria’s thriving e-payment sector, worth N600 trillion in 2023, faces a potential setback in the form of multiple taxes on digital transactions.

This follows the recent announcement that electronic payments will attract a 0.5 percent cybersecurity levy in the next two weeks.

The Central Bank of Nigeria (CBN) made this known in a circular signed by Chibuzor Efobi, the director of payments system management, and Haruna Mustafa, the director of financial policy and regulation. The circular was directed to all commercial, merchant, non-interest, and payment service banks, mobile money operators, and other financial institutions.

This new tax is for the National Cyber Security Fund to protect critical national information infrastructure, among others.

The new tax will raise the number of taxes Nigerians pay on electronic transfers to four to the dismay of many Nigerians. Already, Nigerians pay a N50 stamp duty on transactions, transfer fees (between N10 – N50, depending on fee), and Value Added Tax (of N0.75 on N10 transfer fee; N1.875 on N25 transfer fee; and N3.75 on N50 transfer fee).

The new 0.5 percent fee will now be added to all electronic transactions that are not exempt from the cybercrime levy.

Transactions excluded include loan disbursements and repayments, salary payments, intra-account transfers within the same bank or between different banks for the same customer, and intra-bank transfers between customers of the same bank.

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, among others.

Nigeria’s e-payment system has grown from about N150 trillion a couple of years ago to a little over N600 trillion in 2023. This growth has been due to a mobile payment leap and an almost seamless interbank transfer system, which falls under the purview of this new tax.

According to GSMA, the global body for telecommunication firms, taxes can potentially threaten the success of e-payment.

In a study, GSMA highlighted that in Uganda, the implementation of a one percent mobile money transaction tax caused overall industry transaction values to drop 24 percent in 2018.

In 2019, new mobile money taxes caused both values and volumes to fall in the republic of Congo.

“It is all still new and we are still studying the circular,” one fintech operator told BusinessDay. The operator added that the impact of the levy might be too early to call.

The Socio-Economic Rights and Accountability Project has asked the federal government to reverse levy because of the impact on Nigerians.

“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,” the group said.