Market News

•NACCIMA faults levy, advocates suspension

•Fintechs seek clarification

By Babajide Komolafe, Economy Editor

Controversy has trailed the introduction of the 0.5 per cent cybercrime levy on all electronic transactions with Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) and financial sector operators   expressing concerns, calling on the Federal Government to clarify grey aspects of the law authorizing the levy.

While describing the levy as another stealth tax on the private sector, NACCIMA called for a suspension of the levy for a few weeks pending a comprehensive review and consultation with key stakeholders.

The Cybercrimes (Prohibition, Prevention, Etc) (Amendment) Act 2024, Section 44 (2)(a),  mandates   a levy of 0.5% (0.005) equivalent to a half percent of all electronic transactions value by the business specified in the Second Schedule of the Act.

The businesses include are GSM Providers and all telcos, internet service providers, banks and other financial institutions, insurance companies and Nigeria Stock Exchange.

Consequently, the Central Bank of Nigeria, on Monday issued a circular directing all banks, other financial institutions and payments service providers to implement the levy.

Fintechs seek clarification

Stakeholders however expressed concerns over what they described as ‘grey aspect’ of the Act especially the exact amount of the levy as well as the intended target.

Reflecting the mood among financial sector operators, a top official of Financial Technology Association of Nigeria, FTAN, who spoke on condition of anonymity, said: “It is too early to speak as everyone is still looking for clarifications. Even government officials are saying there’s a mistake in the rate so, nobody knows what to believe. So we will not be able to speak on the issue.”

Also speaking on condition of anonymity, the Chief Executive Officer of a Fintech company, said: “This is all so tiring and frustrating. We will await further clarification from the appropriate regulatory agencies. Candidly there are far reaching implications for the economy should the policy be implemented.”

NACCIMA faults blanket imposition of levy

On its part, the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) faulted the directive by the Central Bank of Nigeria (CBN) on the implementation of a 0.5 percent cybersecurity levy on all electronic transactions, describing it as another stealth tax on the private sector.

The National President of NACCIMA, Dele Kelvin Oye Esq., in a statement said while it is important to bolster the country’s national cybersecurity infrastructure, the blanket imposition of this levy without a limit raises significant issues that warrant a thorough review and reconsideration by the authorities.

He said: “We are still in consultation with our stakeholders, however, we feel compelled to comment on the implementation of this cybersecurity levy as outlined in a circular dated 7th May, 2024 and signed by the respective Directors of the CBN Payments System Management Department and the Financial Policy and Regulation Department of the CBN.

“While NACCIMA recognizes the importance of bolstering our national cybersecurity infrastructure, the blanket imposition of this levy without a limit raises significant issues that warrant a thorough review and reconsideration by the authorities.

“Firstly, the security and defense sectors are already substantial recipients of the national budget. They are responsible for tackling a hybrid of security challenges like terrorism, banditry and other internal conflicts in Nigeria.

“However, cybersecurity is firstly a transnational issue which requires cooperation between international security agencies and requires highly skilled and experienced human resources. For this reason, we believe the burden should be shared across the current security and defense budget.”

Oye further noted, “With over 600 trillion naira (NIBSS 2023) in transactions annually, the projected revenue from this levy is considerable. Therefore, we expect transparency in the application of these funds through clear performance metrics essential to justify the additional levies.

“For this reason, we must ask: what proportion of ALL online transactions are fraudulent transactions? In what way will this levy counteract such transactions? With incidence rates significantly lower than the levy rate, there is a mismatch that needs to be addressed. We will therefore advise a maximum levy cap of Five Hundred (500) naira. It is also a fact that other methods exist to reduce local online cybersecurity risks through professional private sector experts.”

According to him, “Secondly, the allocation and administration of the levy funds are critical. The organized private sector must be involved in the oversight and management of these funds to ensure efficiency and effective use of the levy for public and private sector services, akin to an estate service charge model. Without this, there is a risk of misapplication and lack of accountability.

“Thirdly, the introduction of this levy may be in contravention of the constitutional provision mandating all revenues to be deposited into the consolidated fund, which can only be utilized following appropriations by the National Assembly. We await further guidance on this position.

“Finally, electronic banking transactions are pivotal in advancing financial inclusion for individuals in remote or underserved regions. This levy could potentially discourage the use of e-business platforms, undermining efforts to foster economic growth and financial participation.”

The NACCIMA boss further stated, “The imposition of this levy, which comes at a time when the business community is anticipating the final recommendations from the Presidential Fiscal Policy and Tax Reforms Committee, is particularly troubling.

“We were reassured that the tax system would be streamlined to no more than ten significant types. However, this new tax could detrimentally affect Nigeria’s competitiveness in the Ease of Doing Business rankings, discourage foreign direct investment, instigate capital flight, and exacerbate the talent drain in the technology sector.

“In light of these concerns, NACCIMA appeals to the Central Bank of Nigeria and the relevant authorities to reconsider the imposition of this cybersecurity levy. We urge a suspension of the levy for a few weeks pending a comprehensive review and consultation with key stakeholders. It is imperative to ensure clarity in its implementation and to align it with the broader fiscal policy and tax reform objectives that support the growth and competitiveness of the Nigerian economy.”

The statement added, “NACCIMA remains committed to constructive dialogue and collaboration with the government to find a balanced approach that protects our economy from cybersecurity threats while also fostering a conducive environment for business and investment.”

CBN to address concerns

However, a close CBN source said that the apex bank is aware of the controversy over the cyber security levy and will soon address these concerns.

Speaking of condition of anonymity, the CBN source said: “We are aware of these concerns. We just concluded a meeting and we decided to work in conjunction with relevant government agencies to develop what we call ‘Frequently Ask Questions’ that will address the various concerns and misinterpretations of the Cybercrime Act and the levy.”