The Central Bank of Nigeria (CBN) announced the withdrawal of the controversial circular regarding the implementation of a 0.5 per cent levy on all electronic transaction values on Sunday. This action was taken as part of efforts to address the increasing threats of cybercrime in the financial system.
The withdrawal was communicated through a circular dated May 17, 2024, which was directed to various financial institutions including commercial, merchant, non-interest, and payment service banks, as well as other financial entities, Mobile Money Operators, and Payment Service Providers. The circular was jointly signed by CBN Director of Payments System Management Department, Chibuzo Efobi, and Director of Financial Policy and Regulation Department, Haruna Mustafa. The brief circular stated, “The Central Bank of Nigeria circular dated May 6, 2024, on the above subject is now revoked. Please adhere to this update accordingly.”
The initial implementation of the levy on May 6, 2024, followed the enactment of the Cybercrime (Prohibition, Prevention, etc) (Amendment) Act 2024 and was in line with Section 44 (2)(a) of the Act, which specified the rate deduction. However, due to significant public opposition, the presidency had previously ordered the withdrawal of the policy in a statement. The CBN clarified that the deducted funds were to be transferred to the National Cybersecurity Fund (NCF), managed by the Office of the National Security Adviser (ONSA). This decision faced criticism from stakeholders questioning the legality of ONSA receiving unappropriated funds without National Assembly approval. All banks, Other Financial Institutions, and Payments Service Providers were instructed to implement the new provision of the Act as specified. The levy would be applied at the initiation point of electronic transfers, deducted by the financial institution, and then remitted. The deducted amount would be reflected in the customer’s account with the label: “Cybersecurity Levy”.
The CBN specified that deductions will begin within two weeks of the circular date for all financial institutions. Monthly remittances of the collected levies to the NCF account at the CBN must be done by the fifth business day of each subsequent month.
The apex bank ordered that system reconfigurations for timely submission of remittance files to the Nigeria Interbank Settlement System (NIBSS) should be done within four weeks of the circular for commercial, merchant, non-interest, and Payment Service Banks, as well as Mobile Money Operators. Other Financial Institutions (such as Microfinance banks, Primary Mortgage banks, and Development Finance Institutions) must complete the reconfigurations within eight weeks of the circular. However, some transactions are exempt from the cybercrime levy, including loan disbursements, 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, and instructions from Other Financial Institutions (OFIs) to their correspondent banks.
Exemptions are applicable to various types of banking transactions, including interbank placements, transfers between banks and the Central Bank of Nigeria, inter-branch transfers within a bank, cheque clearing and settlements, and Letters of Credits (LCs). Other exempted transactions encompass banks’ recapitalization-related funding, bulk funds movement from collection accounts, savings and deposits, transactions involving long-term investments like treasury bills, bonds, and commercial papers, as well as government social welfare programs transactions such as pension payments. Also included are non-profit and charitable transactions, educational institution transactions, and transactions involving internal bank accounts like suspense accounts, clearing accounts, profit and loss accounts, inter-branch accounts, reserve accounts, nostro and vostro accounts, and escrow accounts.
The Central Bank has cautioned that failure to remit the levy specified in Section 44 (8) of the Act is an offence punishable by a fine of not less than two percent of the defaulting business’s annual turnover. All institutions under the CBN’s regulatory oversight must adhere to the Act’s provisions and the circular. A report by Proshare questioned the legality of the Office of the National Security Adviser (ONSA) receiving unappropriated funding for activities, particularly the controversial cybersecurity levy aimed at addressing cybercrime threats.
The report argued that allowing ONSA access to funds without National Assembly approval was unconstitutional and against global norms. It further contended that the levy imposed double taxation on bank customers and suggested that a ‘black budget’ for cyber protection issues overseen by the Senate Security Committee would be more appropriate. Analysts also criticized the cybersecurity levy as untimely and detrimental to monetary policy and the economy, advocating for financial institutions to enhance their ICT capabilities to combat cyber insecurity. President of the Association of Capital Market
Academics of Nigeria, Prof. Uche Uwaleke, expressed concerns that the cybersecurity levy could hinder financial inclusion and complicate monetary policy transmission. He recommended withdrawing the circular and implementing the recommendations of the Presidential Committee on Fiscal Policy and Tax Reforms to streamline multiple taxes inhibiting business growth in Nigeria. Managing Director/Chief Executive of Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, criticized the cybersecurity levy as an additional burden on businesses already grappling with multiple taxes and economic challenges. He highlighted the impact of high inflation, exorbitant fuel costs, and exchange rate fluctuations on bank customers, emphasizing the need for banks to enhance their ICT capabilities to address cyber threats.
