- Ask govt to improve Fintech industry regulation, not stiffen it
The Federal Government has come under attack from various stakeholders in the country following the announcement of its decision to commence the charging of a N50 levy on electronic transfers carried out by financial technology companies (Fintech Companies) such as Opay, Moniepoints etc. FESTUS OKOROMADU reports.
The new N50 levy on electronic transfers which is mandatory follows a directive by the Federal Inland Revenue Service and brings to an end the era of free banking services offered by Fintech companies.
The free banking services had made these Fintech companies attractive to members of the public, especially small and medium scale business owners, students and the downtrodden.
Early in the month, the FIRS ordered Fintech companies to start charging a one-time fee of N50 for electronic transfers of N10, 000 and above from Monday, September 9, 2024.
The new regulation provides for the deduction of the levy on the recipient of any electronic receipt or transfer of N10, 000 and above.
Similarly, for equivalent receipts or transfers carried out in other currencies, the levy will be charged at the exchange rates determined by the Central Bank of Nigeria.
However, the introduction of the levy has generated a backlash from Nigerians who have expressed frustration as some viewed it as an excessive taxation initiative under the President Bola Tinubu-led administration.
“This new levy could undermine the benefits, potentially driving students away from digital financial services and forcing the society back into an era of the less secured physical cash-based transactions and as well undermining the CBN’s recent effort at inclusive financial programmes”
One of those who strongly opposed the new levy is the National Association of Nigerian Students which called on the government to reverse the new regulation claiming that its implementation will affect its members negatively.
The student body in a statement signed by its Senate Clerk, Oladimeji Uthman, stated that the levy is aimed at exacerbating the financial burdens of Nigerian students and the general public, especially the downtrodden.
Uthman in a statement noted that the new initiative is merely an indication of the government’s desperation to further increase the tax burden on Nigerians.
It therefore urged the government to explore alternative revenue sources, such as investing in agriculture, quality education, infrastructure development, and job creation instead of imposing additional financial burdens on students and ordinary citizens.
NANS noted that “The proposed N50 Electronic Money Transfer Levy (EMTL) would impact over 40.1 million Nigerian students who use these Fintech services,” stressing that, “Many students rely on financial transfers for their education and daily expenses, and the new levy could significantly reduce the funds available for essential needs such as school fees, textbooks, and living expenses.”
“Fintech platforms have been praised for their low-cost and efficient services, making financial transactions more accessible to students.”
The students’ body insisted that “This new levy could undermine the benefits, potentially driving students away from digital financial services and forcing the society back into an era of the less secured physical cash-based transactions and as well undermining the CBN’s recent effort at inclusive financial programmes.”
While trying to persuade the government against implementing the levy, NANS said, “The EMTL also affects regular transactions such as payment for accommodation, course materials, and other school-related expenses.
“This means that students will lose a portion of their funds to the levy each time they receive money above the N10, 000 thresholds, further straining their financial resources.”
NANS also expressed concerns that the new levy could lead to delays and increased costs in the education sector, hindering timely access to critical funds for students.
Interestingly, the sentiment expressed by the student body is a reflection of a broader discontent among students and ordinary citizens who believe that the government revenue strategies are focused on milking the poor rather than the government and its agencies engaging in critical thinking which focuses on long-term development plans.
Meanwhile, NANS said it plans to advocate against the levy, leveraging the influence of the body to pressure the government to reconsider or modify the policy.
Consequently, the association called on President Tinubu to instruct the FIRS under the leadership of Mr. Zaccheus Adedeji to reconsider the implementation of this levy, particularly in light of its impact on the education sector.
Speaking to the financial implications of the new levy on the broader economy, an economist and lecturer at the University of Abuja, Olanrewaju Aladeitan, noted that the initiative is part of the government’s efforts to diversify its revenue sources amid growing needs to finance public services and infrastructure projects.
He, however, cautioned that the government must take into cognisance the capacity of the masses to be able to pay these taxes as well as their impacts on the business environment.
According to him, the timing of the implementation of the new levy seems to be the major challenge.
He noted that “Although the levy stems from the Electronic Money Levy Regulations, 2022 issued to guide the imposition, administration, collection, and remittance of the electronic transfer levy introduced by the Finance Act, 2020, the implementation at this time when Nigerians are facing numerous economic challenges emanating from the removal of petrol subsidy and the floating of the Naira will increase the burden of the citizens.”
According to him, the immediate past administration of President Muhammadu Buhari whose Minister of Finance, Mrs. Zainab Ahmed, issued the regulation went ahead to implement some aspects of it especially as it concerns regular banking transactions but didn’t extend it to the Fintech companies because that market serves the lower level of our society, indicating the government’s understanding of the place of empathy in governance.
He noted that the key reason why many Nigerians are opposing the new levy is the fact that while it is legal for the government to collect taxes, it is also very important for the government to be prudent in the use of the funds.
“The question that readily comes to mind in this situation is what will the funds received via this tax be used for? The flamboyant lifestyle of those in the helm of governance in Nigeria especially in the current administration shows that they don’t care about the welfare of the citizens.
“Taxes are meant to be used for the development of the society, but in Nigeria, the reverse is the case. While industries and businesses are crying over multiple taxations, the government is not only increasing the tax burden but has very little to show for the ones collected.
“The decision to further increase the tax burden on Nigerians at a time like this is uncalled for. Nigerians already have enough problems to deal with, instead of the government thinking of how to help alleviate the financial burdens brought upon them by the removal of fuel subsidies and the floating of the Naira, what we hear every day is plans to increase taxes. You know that apart from this new levy, there are speculations that the value-added tax (VAT) will soon be increased to 10 percent.
“Unfortunately, the unemployment rate is increasing every day as companies continue to close down due to the impact of the harsh economic policies of this administration. As usual, there is the likelihood of some reduction of transactions on fintech platforms because of this new policy which may as well trickle down to staff reduction.
“I sincerely encourage the government to focus on policies that will encourage productivity to boost the economy before going further to increase taxes,” he said.
On his part, a Fintech expert, Damilola Makinde, said the impact of the new levy on the sector would be far-reaching, stressing that it is bound to slow the growth experienced by operators in recent times.
He argued that the implementation is ill-timed as it is likely going to reduce transactions in those platforms and hence discourage further investment into the young industry.
“The government is on the one hand through the CBN preaching financial inclusion and calling for reduction in cash transactions and on the other hand implementing policies that discourage the same policies by introducing this levy.
“This policy is going to halt innovation in the fintech sector as well as encourage cash transactions which are not too good for the economy for now. The majority of those who patronise these platforms are the downtrodden and students who value that N50 deduction and can therefore be discouraged due to this policy more so as inflation and other economic policies of the government tend to be affecting Nigerians negatively for now.
“The government should rather improve regulation of the industry at this time instead of stiffening it,” he stated.
Fintechs commence implementation
“The government should rather improve regulation of the industry at this time instead of stiffening it”
Fintech platforms like OPay have issued notices to their customers informing them of the new policy from the government and their plan to comply.
Leading Fintech, Opay, stated in a notice, “Dear valued customers, please be informed that starting September 9, 2024, a one-time fee of N50 will be applied for electronic transfers of N10,000 and above, paid into your personal or business account in compliance with the Federal Inland Revenue Service regulations.”
The company clarified that the charges are a government requirement and not a source of revenue for the payment platform.
“It is important to note that OPay does not benefit from these charges in any way, as it is directed entirely to the Federal Government,” the notice read.
This fee introduction follows the Federal Government’s efforts to generate revenue from electronic transactions through FIRS regulations.
Users of other Fintechs like Moniepoint and PalmPay have also reported that these institutions have started implementing the charges.
A former Minister of Finance, Budget, and National Planning, Mrs. Zainab Ahmed, issued the Electronic Money Transfer Levy Regulations, 2022, under her authority, pursuant to Section 89A(3) of the Stamp Duties Act Cap. S8 Laws of the Federation of Nigeria, 2004 (SDA), as amended by the Finance Act, 2021.
The regulations guide the imposition, administration, collection, and remittance of the Electronic Money Transfer Levy which was introduced by the Finance Act, 2020. Key provisions include A one-time levy of N50 on the recipient of any electronic receipts or transfers of N10, 000 or more.
For transfers in other currencies, the levy will be charged at exchange rates determined by the Central Bank of Nigeria; the FIRS is appointed as the administrator of the Levy and is responsible for assessing, collecting, and accounting for the Levy.
It noted that the receiving banks are required to collect and remit the Levy to the FIRS by the next working day or on a date prescribed by the FIRS. For walk-in customers without accounts, the levy must be deducted from the amount payable.
Also, banks must prepare daily lists of cancelled or reversed transactions, detailing the transferee’s name, transaction amounts, levies deducted, and amounts reversed or cancelled. Levies on reversed or cancelled transactions should be deducted from the next day’s collections and returned to affected customers.
Banks are also required to submit monthly returns of the levies collected, including details of reversals and cancellations, to the FIRS within 21 days after each month.
Additionally, banks must retain records of all electronic transfers on which levies are collected for a minimum of seven years.
The provisions noted that banks that fail to collect the Levy will be liable for a penalty of 150 percent of the Levy not collected. If a bank collects the Levy but fails to remit it, the bank will be liable for the levy, plus a 50 percent penalty and interest at the CBN’s Monetary Policy Rate.
More so, failure to render or inaccurately render returns will result in a penalty of 10 percent of the unrendered or incorrectly rendered returns.
Banks are defined under the regulations as “a deposit money bank or financial institution referred to under Section 89A of the SDA, including all banks and other financial institutions defined under the Banks and Other Financial Institutions Act, 2020.
