Nigeria’s central bank recently made a significant decision to withdraw a controversial 0.5% cybersecurity levy on electronic transfers, just days before it was set to take effect. This move came after the Cybersecurity Act was amended in 2024, significantly expanding the scope of the levy to include fintechs, payment service providers, and other financial institutions, and increasing the rate by 900% from the previous 0.005%.
Announcement of Withdrawal
The Central Bank of Nigeria (CBN) issued a circular to announce the withdrawal of the levy. The circular, signed by Chibuzo Efobi, Director of the Payment System Management Team, and Haruna Mustafa, Director of Financial Policy and Regulation, stated, “Please be advised that the above referenced circular [the circular that implemented the levy] is hereby withdrawn.”
Reasons for Withdrawal
Economic Burden
The cybersecurity levy was viewed as “regressive” by financial industry experts due to the sharp increase in costs associated with electronic transactions. This increase came at a time when Nigeria was experiencing its highest inflation rate in thirty years and a severe cost of living crisis. The added financial burden on individuals and businesses was a major point of contention.
Public and Institutional Pressure
Mounting pressure from labor unions and public outcry played a crucial role in the suspension of the levy. The federal government, responding to these concerns, decided to review the levy, leading to its eventual withdrawal.
Impact of the Cybersecurity Levy
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Financial Implications
The now-revoked levy would have imposed a fee on electronic transfers, significantly increasing transaction costs. For instance, a transfer of ₦1,000 would have incurred a ₦5 fee, while a ₦100,000 transfer would have attracted a ₦500 fee. These fees were in addition to existing charges, such as stamp duty, SMS charges, and fees from the national payment switch. For a ₦10,000 electronic transaction, the total cost would have reached ₦130.875.
Exceptions and Loopholes
Despite the widespread application, the levy had several exceptions. Transfers within the same bank, salary payments, school fees payments, and loan repayments were exempt. These loopholes offered some relief but were insufficient to mitigate the overall financial impact on the majority of electronic transactions.
Public Response
The withdrawal of the levy was welcomed by many Nigerians who rely heavily on electronic transfers. Ope, an online phone seller, highlighted the practical implications, noting that since hearing about the levy, he had limited his transfers to accounts within his own bank to avoid additional fees.
Growing Dependence on Electronic Transfers
The significance of electronic transfers in Nigeria’s economy cannot be overstated. According to Paystack, a leading Nigerian fintech company, bank transfers accounted for over half of the transactions processed in 2023. That same year, the value of electronic transactions in Nigeria surged by 66%, exceeding ₦600 trillion.
Conclusion
The decision to withdraw the cybersecurity levy reflects the CBN’s responsiveness to public and institutional concerns. It underscores the importance of balancing regulatory measures with the economic realities faced by the populace. As Nigeria continues to advance its digital payment systems, ensuring affordable and accessible electronic transactions remains a priority for fostering financial inclusion and economic stability.
More Updates would be added to this publication over time.
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