The Central Bank of Nigeria (CBN) has announced a significant reduction in the cybersecurity levy on electronic transactions, lowering it from 0.5% to 0.005%, as part of its new fiscal guidelines for 2024-2025. This reduction follows widespread opposition from various groups, including the Nigeria Labour Congress (NLC), Trade Union Congress (TUC), and numerous bank customers, who had strongly criticized the original levy rate introduced earlier in the year.
Rationale for the Reduction
The CBN’s decision to lower the levy is seen as a response to the backlash that followed its introduction. Initially implemented under the Cybercrime (Prohibition, Prevention, etc.) Act of 2015, the levy aimed to provide funding for cybersecurity initiatives, but its steep rate of 0.5% drew protests from consumer advocacy groups, labor unions, and financial institutions.
One major concern was the potential impact on financial inclusion. Enhancing Financial Innovation and Access (EFInA), a key player in the financial sector, warned that the levy would disproportionately affect low-income consumers, hindering efforts to bring more Nigerians into the formal banking system.
“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 stated.
Purpose of the Cybersecurity Levy
The levy was introduced under the Cybercrime Act to fund the National Cybersecurity Fund, which is administered by the Office of the National Security Adviser. The fund is designed to strengthen the country’s cyber defenses, particularly in an era of growing reliance on digital financial services.
With the rise of digital transactions and the increasing threat of cyberattacks, the Nigerian government sees the fund as crucial to protecting consumers and businesses. However, concerns about the additional cost burden led to a reconsideration of the original rate.
Key Provisions of the New Levy
According to a directive issued by the CBN, the reduced 0.005% levy will be imposed on all electronic transactions carried out by various financial institutions, including:
- Commercial banks
- Merchant banks
- Non-interest banks
- Payment service banks
Despite the continued implementation of the levy, certain types of transactions will be exempt from the charge. These include:
- Wage payments
- Loan disbursements and repayments
- Transfers between accounts held by the same customer, either within the same bank or across different banks
- Clearing and settlement of cheques
- Letters of Credit
- Transactions between banks and the CBN
Government’s Response to Protests
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In May 2024, following widespread protests and growing public outcry, President Bola Tinubu ordered the suspension and review of the cybersecurity levy. The House of Representatives also intervened, demanding the immediate withdrawal of the charge. The key issue was that the 0.5% rate was seen as too steep, especially in a country where financial services are still developing, and many citizens are not yet fully integrated into the formal economy.
In response to these pressures, the CBN has now implemented the reduced 0.005% levy, ensuring that the fund for cybersecurity efforts remains in place but at a much lower cost to consumers.
Balancing Cybersecurity and Financial Inclusion
The revised rate strikes a balance between maintaining the National Cybersecurity Fund and reducing the cost burden on consumers. With the new levy rate, the CBN aims to support continued efforts to bolster Nigeria’s digital financial infrastructure while avoiding the unintended consequence of excluding the most vulnerable members of society from formal financial services.
While the reduced levy is seen as a win for consumer rights advocates, the CBN has reiterated its commitment to cybersecurity. It remains a critical priority as Nigeria continues to transition towards a more digitally connected economy, and the reduced levy is expected to ensure that cybersecurity initiatives are adequately funded without hindering economic inclusion.
The CBN stated that the levy, even at the lower rate, would be enforced across the financial sector in line with its monetary and exchange policies for the upcoming fiscal years.
