FG shuns financial inclusion, imposes more taxes on citizens, depositors

• May generate N3tr yearly from new cybersecurity levy  
• Mixed reactions trail levy, 16 transactions get exemption
• Nigeria joins EU, France, S’Korea, USA on cybersecurity tax
• Stream of electronic banking charges will slow pace of cashless scheme
• Economists insist cybersecurity levy is insensitive
•  Lawyers query legality of NSA on subject matter  
• You can’t tax your way out of economic challenges, economists warn Tinubu
 
The federal government may have traded this year’s 95 per cent financial inclusion and the cashless economy drive, following the imposition of more taxes on electronic payments on which the ambitious goals rest their wings. Today, virtually all financial payments attract multiple taxes, a situation which experts said has increased the burden of survival by millions of poor Nigerians.

Other charges imposed on electronic payments and related services are stamp duties, card maintenance charges, value-added tax (VAT) and SMS charges. The continual increase of the list, experts have warned, is tantamount to penalising Nigerians who opt for e-payment and is a major threat to the cashless economy and financial inclusion drive. 
   
Indeed, there are exemptions to the cybersecurity levy such as loan disbursements and repayments, salary payments, intra-account transfers within the same bank or between different banks for the same customer, intra-bank transfers between customers of the same bank, inter-branch transfers within a bank, letters of credits (LCs), savings and deposits including transactions involving long-term investments such government debt instruments and government social welfare programmes transactions.
 
Yet, the action, which has attracted widespread criticism, may stifle banking services, especially at the grassroots, and it is in contradiction of the Taiwo Oyedele’s Tax Reform Committee’s report, which has decried the multiplicity of taxes.
   
It is more worrisome that the 0.5 per cent cybersecurity comes without a cap, which suggests that the charge could run into several millions of naira for heavy transactions. 
    
It can be deduced that it means that every time someone sends money electronically, a charge of 0.5 per cent is placed on the transferred amount, except for excepted items. 
 
Economists said it would force people to resolve cash transactions, a possibility that would increase the volume of cash outside the banking system, which has exceeded 90 per cent. Consequently, with more cash transactions, banks will suffer, and individuals will be at higher risk of robbery and attacks from thieves.
    
The levy also means the cost of doing business will increase, leaving higher charges and unit prices. In sectors where prices are elastic, service providers and sellers may opt for cash transactions, which means an increase in demand for cash holding – a loss for banks. 
   
Buttressing this point, the Science, Technology and Innovation (STI) Policy Advisor and Founder, Jidaw.com, Jide Awe, said although the 0.5 per cent cybersecurity levy on banking transactions has legal backing from the enactment of the 2024 Cybercrime (Prohibition, Prevention, etc) Amendment Act of 2024, it should come as no surprise to anybody. Awe noted that the convenience associated with electronic transactions is undeniable.
    
“But already consumers have complained and are not comfortable with the slew of banking fees they have to pay for their everyday transactions. The new cybersecurity levy further increases the operational costs of companies and increases the financial burden on individuals in an already harsh economic climate. This is also coming at a time when there have been calls by telcos to raise their tariffs. Timing is, therefore, a concern.
   
“This additional strain on organizations and individuals could lead to further price increases for consumers. However, and at the same time, won’t this continuous stream of electronic banking and financial charges slow the growth of cashless? The intention of the levy appears to be to provide funding for cybersecurity. 
 
“Indeed, cybersecurity has become increasingly critical as digital adoption and diffusion grow nationwide. The goal, however, should be to improve the level of trust in the digital economy and the cashless environment,” he said.
    
Further, he said timeliness can also be looked at from the perspective of the urgent need to address the growing cybercrime threats, stressing that funding has always been a concern.
   
However, Awe said transparent management and utilization of the levied funds are crucial, saying regular evaluations are necessary to ensure the levy strengthens cybersecurity and serves its intended purpose.He added that meaningful stakeholder participation and contribution are critical. He said there are buy-in challenges already with how the levy implementation was introduced.

Meanwhile, businesses are already saddled with the following federal taxes: Company Income Tax, Tertiary Education Tax, Stamp Duties, NITDA levy, Value Added Tax, NASENI Levy, and Police Trust Fund Levy, among others. Still in the works are NYSC Levy and Tertiary Health Levy.  There are also a plethora of taxes and levies imposed by states and local governments,” Yusuf said.
  
He said the cybercrime levy is even more troubling “because it is a tax on electronic transactions, not on profit” which has no regard to the health status of the businesses.  
 
“Even loss-making companies are liable. The poorer segments of society are not exempted either.  This raises serious issues of equity. There is also the issue of proportionality. That is relating the project objective to the amount of revenue being mobilised. 
 
According to the Nigeria Interbank Settlement System (NIBSS), electronic payments on its platform in 2023 were N600 trillion. 0.5 per cent of this is N3 trillion.  
 
“The industry data of electronic payments in 2022, according to the CBN website, was N1550 trillion. 0.5 per cent of this gives N7.75 trillion.  Even if we discount these numbers for the exemptions provided in the law, what will be left would still be staggering,” he said, adding that it is difficult to rationalise spending that much on fighting cybercrime. 
  
On his part, a financial analyst, Abubakar Umar, said the new tax will add to the already multiplicity of taxes bothering businesses with ease of doing business at risk. He argued that some of the decisions taken by Bola Tinubu’s administration were more politically motivated by basic economics as it is known.
   
 “Some of these things are more political than economics, I can say that even inside the government, some people wouldn’t agree to such kind of hardship policies but because it’s a political issue, it will become a case of the more you look, the less you see. It’s a waste if the government cannot corroborate and implement the recommendations of the fiscal committee,” he explained.
    
He further held that the cybersecurity levy is a direct discouragement of cashless policy and people will avoid the banking system as far as they possibly can, saying, “This is a revenue that is supposed to be administered by the FIRS but it goes to an agency directly. You can see that all other taxes would go to FIRS at first before subsequent remittance to its agencies like the NITDA levy, education tax, etc. However, it is disappointing to create a revenue stream directly from customers’ transactions in addition to the existing charges like EMTL, Stamp Duty, etc. This is further creating distrust and making the poor not have any hope in the government.”
   
He further argued that Nigerians living in urban areas would be affected mostly while those in the rural areas will simply stay away from the financial inclusion space and this will affect the country’s monetary policy and other economic indices at large.

From his base in the USA, the CEO, Allen Forensics Inc., a US-based Cyber Risk Advisory Firm, Ben Allen, told The Guardian that the levy under the Cybercrimes Act 2024 is a necessary step toward strengthening Nigeria’s national cybersecurity infrastructure.
    
He said by funding cybersecurity initiatives directly, we can enhance our defenses against increasingly sophisticated cyber threats, saying the levy is designed not just as a financial measure but as a commitment to upholding the security of digital transactions and protecting sensitive information.
    
Allen noted that this proactive approach is critical in a world where cyber threats are constantly evolving and can have severe implications for both the economy and individual privacy.
     
“The timing of the levy is particularly appropriate given the current global and local cybersecurity landscape. With the rise in cyberattacks globally, including significant incidents that have impacted major economies, Nigeria must bolster its cybersecurity measures now. As our economy continues to digitize, from mobile banking to online government services, securing our cyberspace is not just timely but urgent. The timing aligns with these needs and reflects a responsive approach from the government to protect its citizens and institutions effectively,” he stated.
   
Looking at the implications of the Cybercrimes Act 2024 for Nigeria and how other nations are addressing similar challenges, Allen noted that globally, countries are recognising the critical importance of funding cybersecurity initiatives to protect their digital infrastructures.
   
For example, he said in the United States, the Cybersecurity and Infrastructure Security Agency (CISA) receives substantial federal funding to protect national infrastructure. He added that in the European Union, cybersecurity is a major focus of the Horizon Europe programme, which allocates billions of Euros to enhance cyber defenses and promote innovation.
    
The cyber security expert said South Korea and Israel are also notable examples, stressing that South Korea’s investment in cybersecurity is integral to its digital economy strategy, ensuring the safety of its technology infrastructure.
    
He said Israel supports its status as a global leader in cybersecurity innovation through government funding and initiatives aimed at nurturing startups in the cybertechnology sector.
    
“These examples highlight that the approach taken by Nigeria, through the Cybercrimes Act 2024, aligns with global best practices. Investing in cybersecurity is not just about protecting national interests but also about fostering a secure, stable environment that can drive economic growth and development. This kind of investment is crucial as it not only safeguards against immediate threats but also builds the foundation for a resilient digital future.
    
“It is important for us to view the provisions of the Cybercrimes Act 2024, such as the proposed cybersecurity levy, as steps towards strengthening our national and economic security. By doing so, Nigeria is taking proactive measures to ensure a secure digital landscape, which is essential for our ongoing progress and alignment with global digital economy standards,” Allen added.