The implication of the CBN Cybersecurity Levy on Nigerians

The Central Bank of Nigeria (CBN) has confirmed the enforcement of a 0.005% cybersecurity levy on all electronic transactions, a move that has sparked significant debate among Nigerians regarding its implications. This levy, which is part of the Cybercrime (Prohibition, Prevention, etc.) Act of 2015, aims to bolster the nation’s cybersecurity infrastructure amidst rising cyber threats. However, the timing and implementation of this levy have raised concerns about its impact on the already strained economic conditions faced by many citizens.

Background and Implementation

Initially introduced at 0.5% in May 2024, the cybersecurity levy faced backlash from various stakeholders, including labor unions and business associations, prompting President Bola Ahmed Tinubu to suspend it temporarily. Following further discussions and revisions, the CBN has now implemented a reduced rate of 0.005%, effective as of September 2024. Financial institutions are required to deduct this amount from electronic transactions at the point of transfer and remit it to the National Cybersecurity Fund (NCF), which is overseen by the Office of the National Security Adviser.

Economic Implications

Increased Costs for Consumers and Businesses

For everyday Nigerians, this levy translates to an additional cost on all electronic transactions. For instance, transferring N10,000 will incur an extra charge of N50 due to the levy. While this may seem minimal for individual transactions, the cumulative effect could lead to increased operational costs for businesses that rely heavily on digital transactions.Many economists warn that this added financial burden could exacerbate existing economic challenges, such as inflation and high living costs. The Nigeria Labour Congress (NLC) has argued that this levy will worsen hardship for workers and vulnerable groups already struggling with rising prices due to recent economic reforms.

Potential Impact on Financial Inclusion

The introduction of this levy comes at a time when financial inclusion remains a pressing issue in Nigeria. Critics argue that imposing additional charges on electronic transactions could deter people from using digital payment methods, undermining efforts to promote financial inclusion. The National Economic Summit Group (NESG) has called for a more targeted approach to taxation that does not disproportionately affect low-income individuals.

Stakeholder Reactions

Reactions to the cybersecurity levy have been mixed:

• Business Associations: Groups like the Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) have expressed concerns about the lack of transparency regarding how funds from the levy will be utilized. They advocate for a cap on the levy and greater involvement from the private sector in managing these funds.
• Labor Unions: The NLC has vehemently opposed the levy, describing it as excessive taxation that exploits workers further. They demand an immediate review and withdrawal of the policy.
• Economic Experts: Some economists see potential benefits in terms of increased government revenue for cybersecurity initiatives but caution against implementing such measures during a period of economic instability.

Conclusion

While enhancing cybersecurity is undoubtedly crucial in today’s digital landscape, the CBN’s implementation of a 0.005% cybersecurity levy raises significant questions about its timing and broader economic implications. As Nigerians grapple with rising costs and economic reforms, stakeholders are calling for a careful reassessment of such policies to ensure they do not hinder financial inclusion or exacerbate existing hardships. The government must strike a balance between bolstering cybersecurity measures and fostering an environment conducive to economic growth and stability.