- It’s ill-timed, ‘ll worsen Nigeria’s hardship – Experts
- Levy should be targeted at high-net-worth individuals – NESG
- Senate, Ndume differ
The Nigerian government under President Bola Tinubu seems to be running into troubled waters with regard to the planned implementation of the Cybercrime (Prohibition, Provision, etc) (Amendment) Act 2024 as opposition seems to be gaining ground every day, FESTUS OKOROMADU writes.
Indeed, since the Central Bank of Nigeria issued a circular mandating all financial institutions in the country to enact the Cybercrime Levy on Monday, May 6, 2024, the government has continued to meet stiff resistance from every sector.
The CBN in a circular jointly signed by the Director, Payments System Management Department, Chibuzo Efobi, and the Director, Financial Policy and Regulation Department, Haruna Mustafa, directed all commercial banks, merchant banks, non-interest banks, and payment service banks to commence the implementation of the levy two weeks from May 6.
“The levy shall be applied at the point of electronic transfer origination, then deducted and remitted by the financial institution.
“The deducted amount shall be reflected in the customer’s account with the narration, ‘Cybersecurity Levy,’” the circular said.
However, some 16 banking transactions were exempted from the new cybersecurity levy.
They 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 among others
However, the announcement has drawn the anger of many Nigerians.
“So many policies of this government are not only imposing hardship on the downtrodden Nigerians but also businesses, as some of them are shutting down because of the unfriendly business environment”
For the first time in the life of the less than one-year regime of President Tinubu’s administration, both friends and foes of the government are united to resist this policy initiative.
While opposition to the new tax policy varied in perspectives, the common ground seems to be that the timing of the implementation is wrong, bearing in mind the current challenges faced by the citizens due to the devaluation of the Naira and removal of petrol subsidy.
In the same vein, some others are opposing the policy from other points of views.
Such persons argue that the legal framework of the Act supporting the implementation of the policy runs against the spirit of the Constitution.
Others think the amended Act invoked for the deployment is anti the financial inclusion drive of the CBN, even as some view the whole structure of the Act as faulty.
For labour unions and industrialists, the policy is inimical to the growth of the economy with the latter threatening to shut down the economy if the government goes ahead to execute it. Political parties’ ethnic bigots and tribal unions are not left out of the opposition.
Worst still, President Tinubu’s perceived strongest supporting arm of government, the National Assembly appears bent to pressure as the lower chamber of the National Assembly has ordered the CBN to suspend the implementation of the policy.
Mounting opposition
As usual, the Socio-Economic Rights and Accountability Project was the first to take a swipe at CBN calling for the withdrawal of the policy within 48 hours. The body insisted that the cybersecurity levy violates the provisions of the Nigerian Constitution 1999 (as amended) and the country’s international human rights obligations and commitments.
SERAP in a statement signed by its deputy director, Kolawole Oluwadare, said, “The Tinubu administration must within 48 hours withdraw the patently arbitrary and unlawful CBN directive purportedly imposing cybersecurity levy on Nigerians.
The organisation said, “Section 44(8) criminalising the non-payment of the cybersecurity levy by Nigerians is grossly unlawful and constitutional.”
On its part, the Trade Union Congress President, Festus Osifo, described the policy as illogical, adding that it was coming at a time that Nigerians were grappling with the high cost of living brought about by the devaluation of the naira, hike in the cost of petrol, as well as the increment in the cost of electricity.
Osifo in a statement stated, “We are quite disturbed that since the inception of this administration, its policies have brought pain, anguish and sorrow to Nigerians.
“A bank account holder in Nigeria today is currently charged stamp duty, transfer fee, Value Added Tax (VAT) on transfer fee, and all forms of account maintenance levies by both government and the banks. This burden seems not to be enough, as the government is poised to inflict further pain on the already battered Nigerians.
“So many policies of this government are not only imposing hardship on the downtrodden Nigerians but also businesses, as some of them are shutting down because of the unfriendly business environment.
“We call on the Federal Government to give a marching order to the CBN to immediately withdraw the circular and cancel the planned levy forthwith; failure of which we will be left with no option than to mobilise all our members, stakeholders and, indeed, the entire masses to embark on the immediate protest that would culminate in the total shutdown of the Nigerian economy as this is one exploitation too many.”
Stakeholders’ perspectives
Stakeholders are not leaving the debate to civil society or labour unions alone, as the Nigerian Economic Summit Group has faulted the timing of the policy.
The group therefore asked the Federal Government to reconsider the levy as Nigerians are currently groaning under multiple taxation and inflationary pressures.
Proffering an alternative solution, the NESG in a statement, posited that the levy should be targeted at high-net-worth individuals and a specific amount transferred electronically to allay the fears of the populace, who are still battling skyrocketing food and non-food prices. Insisting that, if this policy remains, several Nigerians will boycott electronic funds transfers, which does not even bode well for the government due to revenue loss from electronic transfer levy.
“The NESG, however, feels this is a critical time to implement such a policy. The impacts of the fuel subsidy removal, exchange rate reform, and, most recently, the removal of electricity subsidies still permeate the operating costs of businesses and citizens’ welfare.
“The government must be cautious of the numerous strenuous policies that stiffen the purchasing power and welfare of corporations and individuals. Therefore, the government needs to properly sequence reforms for efficient socioeconomic outcomes, especially those that strain the people.”
NESG also raised concerns that the policy was introduced at a time when the Presidential Committee on Fiscal Policy and Tax Reforms had not finalised its mandate.
“To avoid conflict of interests and ensure no policy misalignment, the NESG strongly believes that the levy should be deferred and proper consultation until the Fiscal Policy Committee deems it necessary to implement it.
“The cybersecurity levy needs to be reconsidered, considering the CBN’s concern about the high rate of financial exclusion and increased currency in circulation.
“The cybersecurity levy adds to the list of levies and taxes collected by financial institutions on behalf of the government, including stamp duty, electronic transfer levy, and VAT. This embodiment of taxes increases the transaction costs of using a bank and could disrupt the financial intermediation role of banks.”
Concerns over management of the funds
On its part, the Lagos Chambers of Commerce and Industry raised a key concern over the use of the funds expected to be generated from the implementation of the levy.
While pointing out that the funds from the charge might not be used to enhance the country’s cybersecurity architecture to guarantee cyber-safety for technology users in Nigeria as stated in the CBN circular.
Director General of LCCI, Dr. Chinyere Almona, said in a press release that the justification for the levy was unclear.
Almona demanded that it should be withdrawn to allow more consultations with critical stakeholders.
Almona said, “The directive that the remittance of this levy should go to the Office of National Security Adviser suggests that the funds may not be used to enhance our cybersecurity architecture to guarantee cyber-safety for technology users in Nigeria.
“We believe that since the collection of this levy cannot guarantee the protection of payers from cyberattacks, it is difficult to justify its collection at this time.
“In the same vein, the collection approach with some exemptions can create confusion regarding what transactions qualify for the exemptions.
“Implementing this directive can gradually encourage some people to return to holding cash to avoid paying the levy. This can negatively impact the achievement already recorded with the cashless policy.”
Reps call for circular’s withdrawal
Indeed, the Cybersecurity levy is fast becoming an orphan, as members of the House of Representatives on Thursday called for its withdrawal describing it as ‘ambiguous.’
This followed the adoption of a motion of urgent public importance moved by the House Minority Leader, Hon. Kingsley Chinda (PDP Rivers) and 359 others.
Northern Elders Forum fumes
Regional social-political associations are equally not left out of the ongoing debate on the implementation of the Cybersecurity levy, as the Northern Elders Forum, Northern Elders Forum, on Thursday led by Prof. Ango Abdullahi condemned the CBN’s decision to impose the levy on bank customers across the country.
The Forum in a statement signed by its Director of Publicity and Advocacy, Abdul-Azeez Suleiman, released in Kaduna, expressed dissatisfaction with the policy.
NEF described CBN’s directives as “arbitrary, illegal, and out of touch with the realities faced by Nigerians.
The northern body, therefore, called on the government to reconsider the policy and explore alternative measures to ease the financial strain on individuals while still promoting the use of electronic payments.
The NEF pointed out that the introduction of cybersecurity levies, in addition to existing fees such as stamp duty, transfer fees, value-added tax, and SMS charges, has placed an unbearable financial burden on individuals engaging in electronic transactions.
While acknowledging the importance of cybersecurity in safeguarding electronic transactions, the NEF emphasized the need for a more balanced approach that ensures the costs of security measures are reasonable and do not excessively burden bank customers.
“It is imperative that the administration takes into account the concerns raised by a vast majority of Nigerians and prioritises policies that protect the interests of the people while also fostering economic growth and development.”
The forum emphasized the importance of considering the impact of regulations on ordinary citizens and advocating for measures that promote financial inclusion and alleviate economic challenges.
“It is crucial that the government listens to the concerns of organisations like the NEF and works towards implementing policies that benefit all Nigerians, rather than burdening them with additional costs and hardships.
“It is essential to strike a delicate balance between enhancing cybersecurity and easing the financial burden on the populace, particularly at a time when the Nigerian economy is facing significant challenges due to inflation and other economic factors,” it added.
Financial experts react
Reacting to the CBN circular, Professor of capital market and the President of the Capital Market Academics of Nigeria, Uche Uwaleke, said the cybersecurity levy was 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 noted that the proposed policy carried 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,” he said.
He said the mandate of the committee included streamlining multiple taxes and levies currently inhibiting the growth of businesses in Nigeria.
Also commenting, the Executive Director of the Civil Society Legislative Advocacy Centre, Auwal Musa Rafsanjani, described the levy as an anti-poor policy that would bring more hardship to the already impoverished Nigerians.
“You cannot continue to punish the citizens. The government is leaving big corporations to continue to do what they are doing and continue to tax the poor. Nigerians have to be alive to be productive and contribute to the economy.
“If the government continues to emasculate Nigerians with these harsh economic policies, Nigerians cannot be productive to contribute to the economy. The anti-poor policies of this administration need to be looked into. There is too much emasculation that is targeted at poor Nigerians.
“Banks have continued to deduct all sorts of fees from every transaction. This is not fair and it is not how to generate revenue. The money that the government is wasting and spending recklessly is where they need to stop if they want to fund and revive the economy, not taxing the money of poor people in the bank.
“We are not in support of this policy because it is not poor people friendly, meanwhile those in government are not feeling anything because they don’t even pay any tax and everything is provided for them, this is not a good way to do things.”
The CEO, Centre for the Promotion of Private Enterprise, Muda Yusuf, also disagreed with the CBN levy on all electronic transactions.
He argued that businesses and the generality of citizens are yet to recover from the shocks of current reforms. Inflationary pressures have not abated, the high cost of living is still a major worry, and operating and production costs for businesses remain elevated, amidst weak consumer purchasing power.
This is not a good time to impose an additional levy both on businesses and citizens. The magnitude of the levy is even of a bigger concern,” he stated.
According to him, “The expectations of citizens and corporate organisations are that taxes and levies are being rationalised and streamlined for a better business environment. The Presidential Committee on Fiscal and Tax Reforms had said this repeatedly. The announcement on the cybercrime levy contradicts earlier assurances by the Presidential Committee on taxes: Company Tax, Tertiary Education Tax, Stamp Duties, NITDA levy, Value Added Tax, NASENI Levy, Police Trust Fund Levy, among others.”
He also noted that there are also a plethora of taxes and levies imposed by states and local governments, saying that “most MDAs, especially those performing regulatory roles, have practically become revenue generating agencies. Many have revenue targets.
“All of these impose enormous pressures on investors in the economy. This diminishes their capacity to drive economic growth and create jobs and also fueling inflation.
“The cybercrime levy is even more troubling because it is a tax on electronic transactions, not on profit. It has no regard to whether the business is healthy or not. Even loss-making companies are liable. The poorer segments of society are not exempted either. This raises serious issues of equity.”
He noted that the total budget appropriation for defence and security in the 2024 budget was N3.2 trillion, and infrastructure appropriation was N1.32 trillion. These are just appropriations. Actual releases are often much less.
“There is also the risk the legislation poses to the cashless policy of the Central Bank over which significant progress has been made. We are likely to see an increased migration to the use of cash as against electronic platforms.”
The CPPE boss pleaded with the relevant authorities to put the implementation of the legislation on hold while a thorough review is done, proposing a robust stakeholder engagement to review the legislation.
Also reacting to the new policy, Andersen Global, said the introduction of the new levy has elicited mixed reactions from stakeholders as it will inevitably increase the cost of doing business in Nigeria and may impact the growth in the adoption of digital transactions.
“While the government continues its drive to increase revenue, the introduction of this additional levy may appear ill-timed considering the current economic climate vis-a-vis the government’s commitment to the National Tax Policy of 2017 to reduce the number of taxes in Nigeria.
“Financial institutions and payment service providers will also need to adjust their financial and operational strategies to accommodate and account for the new levy to ensure they remain compliant while managing additional costs of compliance.
“More so, business owners who rely heavily on digital transactions for receiving payment may see an increase in operational costs due to considerations on adjustments in pricing and cost transfer. It is therefore important for stakeholders and businesses to analyse the financial impacts of this directive on their cash flow.”
Senate, Ndume differ
However, the Senate backed the cybersecurity levy stressing that it came into being through a collaborative effort that involved the National Assembly’s ICT and Cyber Security Committee and a transparent public hearing process, with contributions from various stakeholders.
“The cybercrime levy is even more troubling because it is a tax on electronic transactions, not on profit. It has no regard to whether the business is healthy or not. Even loss-making companies are liable. The poorer segments of society are not exempted either. This raises serious issues of equity”
It also argued that the levy was not punitive, but aimed at protecting national security and the economy.
Chairman of the Senate Committee on National Security and Intelligence, Senator Shehu Umar Buba, (APC Bauchi South), who addressed the controversy surrounding the proposed implementation of the cybersecurity levy by the CBN, said that the levy was provided for in the Cybercrimes (Prohibition, Prevention, etc) (Amendment) Act, 2024.
Senator Buba noted that the provisions of the cybersecurity levy had been in place since 2015 but were delayed due to unclear interpretations and applications.
He, however, clarified that the levy was not punitive as it had numerous exemptions to protect and relieve ordinary citizens, particularly the poor.
Conversely, Senator Ali Ndume has condemned the controversial cybersecurity levy, saying that it is not proper for the government to continue to levy the citizens while nothing is done to increase their income.
The lawmaker representing Borno South Senatorial District in the Senate said that the proposed cybersecurity levy will increase the tax burden on Nigerians.
“You cannot be charging taxes on people when you are not increasing their income. Their source of income, you are not widening it, you are not increasing it. I am not part of those that support levying people anyhow,” Ndume said.
“The amendment to the Cybersecurity Act, I supported it but not the nitty-gritty and I am not trying to run away from any blame. We have issues with cybercrime, you know that, and there is a need for the government to improve the Cybercrime Act, that is what I understand by the amendment.
“Looking at the nitty-gritty would have been the responsibility of interested parties. If I had known there is an issue where a cost would be transferred to a customer or a Nigerian I would not agree,” he said.
Ndume said the lawmakers alone should not take the blame for the Act, saying that where some things escape the notice of the lawmakers, civil society organisations and the labour unions are supposed to point out grey areas during public hearing.
