•Depositors, experts kick over new levy, other bank charges
•Manufacturers say businesses choking, move may worsen tax evasion
•Lawyer unearths gaps in Cybercrime Act
By Chinwendu Obienyi and Merit Ibe
The federal government may be targeting a whopping N2 trillion annually from the cyber security levy which it has directed banks to impose on depositors amid widespread criticisms.
A directive from the Central Bank of Nigeria (CBN) mandates commercial banks to reconfigure their systems to deduct a cyber security levy of 0.5 per cent for every electronic transaction, which begins in two weeks’ time.
The latest levy swells the number of existing charges depositors are subjected to. They include; transfer fee, card maintenance fee, card issuance charges, stamp duties, VAT on SMS, N4 SMS charges for receiver and sender, among others.
There are, however, exceptions to the new levy. They include; loan disbursements and payments, salary payments, intra-account transfers, transactions on long-term investment, non-profit and charitable transactions, banks’ recapitalization related funding and 10 others.
Industry watchers say the government is already salivating over an estimated N2trillion (after factoring in the exemptions) that will come from the 0.5 per cent cyber security levy, using the 2023 electronic payment transactions figure of N600 trillion as a guide.
Again, there are genuine concerns as to how such transactions can be properly differentiated for implementation and insulated from possible abuse by the banks.
Already, expressions of anger, frustration and calls to jettison the new initiative have reached an alarming rate, with the organised labour and other stakeholders threatening fire and brimstone should the government not rescind its decision on pelting the citizens of an ailing economy with additional levies.
Operators in the SMEs space are lamenting that the new levy will significantly increase the cost of doing business, encourage tax evasion, discourage the adoption of cashless policies and hinder financial inclusion efforts.
Although the CBN has announced that the levy, which it claims was introduced to contain the rising threats in cybercrime, will commence in two weeks, many stakeholder groups including the Nigeria Labour Congress (NLC), Socio-Economic Rights and Accountability Project (SERAP) are mounting pressure on the CBN to withdraw the levy as it violates the provisions of the 1999 Nigerian Constitution as well as international human rights.
While the legality of the levy is found in the Cybercrime Act amended 2024, many insist that the interpretation seems to leave some gaps.
Omoruyi Edoigiawerie, Lead Partner, Edoigiawerie & Co, who is also a customer to one of the new generation banks, noted that while the act says these transactions should be deducted by businesses, the act further lists five types of businesses that fall within the ambit of the regulation.
“It talks about internet service providers, banks and financial institutions, insurance companies and the stock exchange market. So these five entities are the businesses that are bound by that Section 44 subsection 2 and then you now have the guidelines from CBN.
“First of all, there are other legal issues that come within the foray of this conversation. Does the CBN have powers to issue these guidelines? Does the Act empower them to do so?” he queried.
Dr. Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Public Enterprises (CPPE), emphasized the significant financial implications of the levy and its potential to hinder the harmonization of taxes, a key objective of fiscal policy reforms.
“You can imagine the implications of this now, first, for the cost of doing business and also the implication of what the government is even trying to do in terms of harmonizing taxes. As at 2023, e-payment data was about N600 trillion and so if you are taking 0.5 per cent of that, you are talking about an amount of close to N3 trillion,” Yusuf said.
Harmonisation of taxes has been the focus of the Taiwo Oyedele-led presidential fiscal policy and tax reforms committee but a statement from Oyedele, revealed further that the committee may not have been involved in this new levy.
The statement read: “The new cyber security levy has come to the notice of the Presidential Fiscal Policy and Tax reforms Committee. We are currently reviewing the new tax and engaging internally with relevant stakeholders to understand the rationale for it and decide on the next steps.”
While the government anticipates significant revenue from the levy, estimated to be over N2 trillion, critics argue that the timing of its introduction, amid raging inflation and FX volatility, shows gross insensitivity on the part of the government.
Marcel Okeke, a former chief economist at Zenith Bank, expressed concerns over the government’s disregard to the crippling economic challenges facing Nigerians to introduce a new levy.
He said: “The government appears not to be sensitive towards the feelings of Nigerians because this is one tax too many especially as to the timing of the directive when there is serious outcry in the polity about people suffering, high rate of inflation, FX volatility, amidst other challenges and here we are as a government imposing another tax on everyone who use the banks as well as technology to transfer cash.
“At the end of the day, many people are kicking against it, especially interest groups and stakeholders and one begins to wonder how the government keeps making baffling decisions like this as regards the interest of Nigerians. I am wondering why this kind of tax should come up at this point.
“I am still researching as to whether this kind of levy is in other jurisdictions. Maybe, the government wants to use what is realized to start fighting cybercrime, I do not understand. Moreover, this is likely to work against cashless policy that is being talked about and financial inclusion because many people will end up not using banks or even their apps to effect transactions, hence the progress made so far in financial inclusion and cashless policy is likely to be lost.”
Okeke further expressed his concerns over the implementation of the exemptions listed by the CBN, such as loan disbursements, salary payments, and charitable transactions, adding that it may be challenging to differentiate between exempt and taxable transactions, leading to potential abuse and evasion.
As the economy struggles, the manufacturing sector appears to be the most hit. Segun Ajayi-Kadir, Director General, Manufacturers Association Nigeria (MAN), expressed frustration arising from the new levy. He disclosed that manufacturers currently pay over 30 different taxes, levies and fees to agencies of the federal, state and local governments.
The taxes include Company Income Tax; Stamp Duties; Petroleum Profit Tax; Capital Gains Tax; Value Added Tax; Personal Income Tax; Withholding Tax; Tertiary Education Tax; one per cent of payroll contribution to NSITF; 10 per cent of Payroll Contribution to PenCom; one per cent of Payroll ITF Levy and National Information Development Levy.
Others are Cabotage levy; Radio and TV Licenses; Police Special Trust Fund Tax levy; Niger Delta Development Commission levy; National Agency for Science and Engineering Infrastructure levy; Land Use Charge; Parking Fee; Consumption Tax; Road Tax; Standard Organization of Nigeria fees; Nigeria Content Development levy; NAFDAC levy; Nigeria Health Insurance Authority contribution; Signage Fees.
Daniel Dickson-Okezie, a manufacturer, said that there are many levies and taxes that manufacturers pay outside the usual FIRS and state taxes. Some of these include signage fees, LG taxes from manufacturers and businesses, charges for TV and radio, taxes for mobile vehicles owned by manufacturers, with or without stickers.
“There are more than 15 local government taxes and levies on stickers. One problem is that sometimes when the vehicles move from one local government or state to another, they reject the stickers from their state and insist that they pay another levy for coming into another state. So these are some of the challenges. Worse are the other forms of levies that area boys or touts collect. Road transport unions also claim to be making returns to the governments and officials.”
According to Dickson-Okezie, transporting a container from Tincan port in Lagos to Ilupeju or Mushin may cost a manufacturer higher than the cost of transportation of the raw material from China to Nigeria as a result of charges and levies other than the FIRS and state inland revenue services.
“Considering the difficulties we are passing through in this nation now, the timing of the cyber-security levy is most unfortunate as businesses and multinationals are leaving Nigeria. SMEs and companies are dying. It will affect manufacturers heavily because already, they are over-taxed,” he lamented.
Dr. Chinyere Almona, Director-General, Lagos Chamber of Commerce and Industry (LCCI), told Saturday Sun that the directive by the CBN to banks to implement section 44 of the Cybercrime Act 2024, which imposes a 0.5 per cent cyber security levy on Nigerians, is a subject of concern to LCCI.
He observed that: “By this directive, individuals and businesses will be burdened with an additional levy amidst unsettled performance crises with power supply after the recently reviewed electricity tariffs. Unfortunately, the upward review of the electricity tariff has not brought about a commensurate boost in power supply to justify the additional costs to individuals and businesses. We urge the government to reconsider the implementation of this directive as its timing is wrong, and the justification is unclear. This directive should be withdrawn while we call for more consultations with critical stakeholders.”
Almona further expressed worry, noting that “at a time when government revenues are at record levels from higher crude prices, higher revenues accrued to the Federal Allocation Account, and saved resources from the stoppage of subsidies, we expect to see projects created to enhance the living standard of the people as a dividend of democracy for the sacrifices made by Nigerians. In the face of biting inflation that has continued to weaken the purchasing power of consumers and with companies burdened with a rising cost of production, any further imposition of additional cost burden will slow down economic activities and drag our economic growth drive.”
The LCCI boss called on the government to work towards amending the enabling law to reflect current realities, initiate programmes that will reflate the economy, and invest more in digital infrastructure to support business operations.
He pointed out that the directive that the remittance of the cyber security levy should go to the Office of National Security Adviser suggests that the funds may not be used to enhance cyber security architecture to guarantee cyber safety for technology users in Nigeria.
