Cybersecurity levy will worsen hardship – Labour

Cybersecurity levy will worsen hardship – Labour

• Category: News
• Date 08-05-2024

Nigeria Labour Congress, Trade Union Congress and bank customers have opposed the newly introduced cybersecurity levy by the Central Bank of Nigeria, demanding its immediate withdrawal.

The NLC on Tuesday in a statement signed by its President, Joe Ajaero, lamented that the levy was another anti-people policy of the government, imposed amid economic hardship.

Ajaero noted, “NLC strongly condemns the recent directive by the Central Bank of Nigeria to levy a 0.005 per cent ‘Cybersecurity Levy’ on electronic transfers.

“This levy, to be implemented by deduction at the transaction origination, is yet another burden on the shoulders of hardworking Nigerians. This move, ostensibly aimed at bolstering cybersecurity measures, threatens to exacerbate the financial strain already faced by Nigerians.”

Similarly, the Trade Union Congress on Tuesday kicked against the introduction of a cybersecurity levy by the Federal Government, describing it as a move that would drive Nigerians away from the formal banking system.

Speaking with the National Vice President of TUC, Tommy Etim, said, “It is highly unfortunate. It is also another way to discourage people from banking. If people are discouraged from banking because of deductions such as cybersecurity levy, and admin charges, it means that the informal economy, manufacturing economy and entrepreneurs will suffer.

“It’s unfortunate that the government will carry out such a sensitive issue without stakeholder engagement. Nigeria is too big to be taken for granted. The time has come for them to know that democracy involves the people. The National Assembly should not allow this to happen otherwise it will be discouragement in terms of banking transactions. Nigeria’s problems cannot be solved overnight.”

He called on the government to stop implementation of anti-people policies.

The President of Bank Customers Association of Nigeria, Dr. Uju Ogubunka said that the move would adversely impact the cashless and financial inclusion drive of the apex bank.

He said, “I do not call it charge; I call it tax. It is another form of government tax. It can never be a welcome one because they did not give us any reason; there is no justification.

“If you want to do such a thing, you must provide your reason or justification. What about those who do not have accounts in the bank for instance? So, how do you get their portions? For me as an individual, I think it is unfair and that the government did not come with clean hands. I cannot remember anybody being consulted before this kind of policy.

“What they are trying to do is to set us backwards. We are talking about less cash in this economy and now you want to be charging customers for making transfers. If you do not want to be charged then you carry your cash. How are we helping this other policy, if we go this way? I think they need to rethink it and have wider consultations.”

The CBN in a circular issued on Monday ordered banks operating in the country to start charging a cybersecurity levy on transactions in two weeks from the date of the issuance of the circular.

The apex bank referenced earlier circular and letter to all banks dated June 25, 2018 (Ref: BPS/DIR/GEN/CIR/05/008) and October 5, 2018 (Ref: BSD/DIR/GEN/LAB/11/023), respectively, on compliance with the Cybercrimes (Prohibition, Prevention, etc.) Act 2015 and the recent call by the National Security Adviser office for the full enforcement of Nigeria’s amended cybercrime law.

The enforcement of the law included the operationalization of the National Cybersecurity Fund, targeting 0.5 per cent of all electronic transactions by businesses listed in the second schedule of the amended law.

The affected businesses include GSM service providers and all telecommunication companies, internet service providers, banks and other financial institutions, insurance companies and the Nigerian Exchange

The CBN circular, directed at all commercial, merchant, non-interest and payment service banks, other financial institutions, mobile money operators and payment service providers, reads, “The levy shall be applied at the point of electronic transfer origination, then deducted and remitted by the financial institution. The deducted amount shall be reflected in the customer’s account with the narration. ‘Cybersecurity Levy’.

“Deductions shall commence within two weeks from the date of this circular for all financial institutions and the monthly remittance of the levies collected in bulk to the NCF account domiciled at the CBN by the fifth business day of every subsequent month.”

Transactions that the CBN exempted from the levy included: 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, other financial institutions’ instructions to their correspondent banks, interbank placements, banks’ transfers to CBN and vice-versa.

Others are “Inter-branch transfers within a bank, cheques clearing and settlements, letters of credits, banks’ recapitalization-related funding only bulk funds movement from collection accounts, savings and deposits, including transactions involving long-term investments, such as treasury bills, bonds, and commercial papers.”

Also, “Government social welfare programmes transactions e.g. pension payments, non-profit and charitable transactions, including donations to registered non-profit organizations or charities, educational institutions transactions, including tuition payments and other transactions involving schools, universities, or other educational institutions.”

The CBN said the exemption was to avoid multiple applications of the levy on the same transaction/transfer.

The move by the CBN came barely a week after the Federal Government directed Deposit Money Banks to immediately begin the deduction of 0.375 per cent stamp duty charge on all mortgaged-backed loans and bonds.

The new directive was contained in a message sent to customers by banks as directed by the Federal Inland Revenue Service.

It indicated that the government was expanding the scope of stamp duty charges to include foreign transactions and loans, alongside regular bank transfers, as part of efforts by the tax authority to enhance fiscal performance.

Recall that banks were also in January directed to deduct stamp duty on old foreign transactions between January 2021 and December 2023 by January 31, 2024.

Meanwhile, the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture has described the cybersecurity levy as another stealth tax on the private sector.

In a statement by NACCIMA National President, Dele Kelvin Oye, said while it was important to bolster the country’s national cybersecurity infrastructure, the blanket imposition of the levy without a limit raised significant issues that warrant a thorough review and reconsideration by the authorities.

He said, “We are still in consultation with our stakeholders. However, we feel compelled to comment on the implementation of this cybersecurity levy as outlined in a circular signed by the respective Directors of the CBN Payments System Management Department and the Financial Policy and Regulation Department of the CBN.

“While NACCIMA recognizes the importance of bolstering our national cybersecurity infrastructure, the blanket imposition of this levy without a limit raises significant issues that warrant a thorough review and reconsideration by the authorities.

“Firstly, the security and defence sectors are already substantial recipients of the national budget. They are responsible for tackling a hybrid of security challenges like terrorism, banditry and other internal conflicts in Nigeria. However, cybersecurity is firstly a transnational issue, which requires cooperation between international security agencies and requires highly skilled and experienced human resources. For this reason, we believe the burden should be shared across the current security and defence budget.”

According to Oye, with over N600tn in transactions annually, the projected revenue from this levy is considerable.

“Therefore, we expect transparency in the application of these funds through clear performance metrics essential to justify the additional levies.

“For this reason, we must ask: what proportion of all online transactions are fraudulent transactions? In what way will this levy counteract such transactions? With incidence rates significantly lower than the levy rate, there is a mismatch that needs to be addressed.

“We will, therefore, advise a maximum levy cap of N500. It is also a fact that other methods exist to reduce local online cybersecurity risks through professional private sector experts,” he stated.

The NACCIMA boss maintained that the allocation and administration of the levy funds were critical.

“The organized private sector must be involved in the oversight and management of these funds to ensure efficiency and effective use of the levy for public and private sector services, akin to an estate service charge model. Without this, there is a risk of misapplication and lack of accountability.

“Thirdly, the introduction of this levy may be in contravention of the constitutional provision mandating all revenues to be deposited into the consolidated fund, which can only be utilized following appropriations by the National Assembly. We await further guidance on this position,” he asserted.

Echoing the resistance to the cybersecurity levy on Tuesday, a financial economist and Professor of Capital Market at the Nasarawa State University Keffi, Uche Uwaleke, described it as ill-timed, with a chance of lessening the impact of monetary policy transmission.

He told The PUNCH, “I think the cybersecurity levy is ill-timed, coming at a time when the CBN is concerned about the increasing rate of currency circulating outside the banks. It carries the downside risk of discouraging financial intermediation as well as complicating the transmission of monetary policy, with more people shunning the banks due to high charges.

“The result is that it makes it a difficult effort by the CBN to tame inflation.”

He, therefore, called for the suspension of the policy, saying, “The circular should be withdrawn, especially against the backdrop of assurances by the government that its plan to increase revenue would not include introducing new taxes or increasing tax rates.

“To this end, the government should suspend the policy while getting set to implement the recommendations of the Presidential Committee on Fiscal Policy and Tax Reforms, whose mandate includes streamlining multiple taxes and levies currently inhibiting the growth of businesses in Nigeria.”

Also, the Socio-Economic Rights and Accountability Project warned the Federal Government to reverse the 0.5 per cent cybersecurity levy or face legal action.

SERAP threatened to sue the government if it failed to reverse the levy within 48 hours.

The non-governmental organization stated this Tuesday on its ‘X’ (formerly Twitter handle), @SERAPNigeria.