Implementing a 0.5 percent cybersecurity levy on financial transactions will negatively impact financial inclusion, the Enhancing Financial Innovation and Access (EFInA) has disclosed,
In a report titled, ‘High cost of financial services: A barrier to formal financial inclusion in Nigeria,’ EFInA analysed the events surrounding the cybersecurity levy since the beginning of May and its impact on financial inclusion in the country.
Read also: CBN directs banks to stop 0.5% cybersecurity charges
“While the Cybercrimes Levy by the Federal Government is an effort to fund the strengthening of consumer protection in a fast-growing digital economy, the indirect impact of transferred costs to consumers that are already price-sensitive elevates the risk of further exclusion from formality,” EFInA said.
Before its recent suspension, the Central Bank of Nigeria (CBN) directed all financial institutions to begin the deduction of a 0.5 percent cybersecurity levy on all electronic transactions effective May 20, 2024. The levy was to be remitted to the National Security Fund.
The circular released on May 6, 2024, noted that the deductions were to be effected on all electronic transactions through commercial banks, merchant banks, non-interest banks, payment system banks, other financial institutions, mobile money operators, and payment service providers.
According to EFInA, financial inclusion in Nigeria rose to 74 percent in 2023 from 68 percent in 2020.
The organisation that tracks the growth of financial inclusion in the country noted that Nigerians are price-sensitive when using formal financial services. The imposition of additional costs on businesses and service providers will put further pressure on the operating expenses of payment service providers and other participants in the financial services ecosystem – further inflating an already high-cost environment.
“Over 20 million Nigerian financial service consumers, including more than 13 million who are already formally served, are anticipated to feel the impact of any price increase in accessing formal financial services primarily due to their sensitivity to transaction and infrastructure costs. The sensitivity to increased transaction pricing could deter or disincentivise these individuals from utilizing formal financial services,” it stated.
Read also: Cybersecurity levy in Nigeria: Can a nation tax itself to prosperity?
EFInA further implored government agencies to collaborate and consider consumers before making financial policies that may impact the nation’s financial inclusion.
The 0.5 percent cybersecurity has now been suspended following an outcry from the public and private sectors. While protesting the policy, members of organised labour noted that it will increase the tax burden on workers, as the manufacturers will transfer the extra cost of transactions to consumers.
