….Sets Implementation Criteria For Apex Bank
The Nigerian Economic Summit Group (NESG), one of the leading economic think-tank advocacy groups in Nigeria, has flawed the directive of the Central Bank of Nigeria (CBN) mandating banks in the country to deduct 0.5% Cybersecurity Levy on digital transactions by bank customers nationwide.
The group, in a statement on Thursday, described the apex bank’s directive as inappropriate based on the timing, especially as millions are groaning due to rising cost of living crisis exacerbated by rising inflation, as well as considering CBN’s concern about the high rate of financial exclusion and increased currency in circulation.
The NESG advised that the levy should be targeted at high-net-worth individuals and a specific amount transferred electronically to allay the fears of the populace, who are still battling skyrocketing food and non-food prices.
It warned that if this policy remained, several Nigerians will boycott electronic funds transfers, which does not even bode well for the government due to revenue loss from electronic transfer levy.
The NESG, however, felt that implementing the policy now would be dangerous as the impacts of the fuel subsidy removal, exchange rate reform, and, most recently, the removal of electricity subsidies continued to worsen the operating costs of businesses and citizens’ welfare.
The NESG further clarified: “The government must be cautious of the numerous strenuous policies that stiffen the purchasing power and welfare of corporations and individuals. Therefore, the government needs to properly sequence reforms for efficient socioeconomic outcomes, especially those that strain the people.
“This policy is coming when the Presidential Committee on Fiscal Policy and Tax Reforms is yet to finalise its mandate. One of the terms of reference of the Committee is that the number of taxes should be streamlined. Introducing a cybersecurity levy could thwart this essential mandate. To avoid conflict of interests and ensure no policy misalignment, the NESG strongly believes that the levy should be deferred and proper consultation until the Fiscal Policy Committee deems it necessary to implement it”, the group added.
While recognizing the exemptions highlighted by the CBN on the controversial levy, the NESG advised the apex bank to be proactive in monitoring banks’ implementation to curb citizen exploitation and expressed concerns that with the exemption provided, there would still be overlapping transactions.
To avoid the abuses, it stated that it was imperative for the monetary authority to develop an effective and practical framework to limit the levy to liable transactions.
The group stressed: “It is noteworthy that the policy is intended to fight cybercrimes and raise revenue for the government. However, higher revenue should be achieved without imposing severe burden on poor and vulnerable Nigerians. Meanwhile, the policy could also create loopholes for cybercriminals to devise alternative routes to perpetrate the heinous acts.
“To narrow the alternative ways of committing cybercrimes, the NESG posits an integrated approach in the fight against cybercrimes involving the collaborative efforts of financial institutions, security agents, the EFCC and other key stakeholders. Hence, introducing a cybersecurity levy penalises the populace for the failure of the system to uproot the sources of cybercrimes.
“The cybersecurity levy needs to be reconsidered, considering the CBN’s concern about the high rate of financial exclusion and increased currency in circulation. At the NESG, we are concerned that implementing this policy at this critical time will decelerate the pace of achieving the 95 percent financial inclusion target of 2025. The mere news of charges on bank transactions will demotivate many Nigerians from accessing financial services, potentially propelling a surge in the demand for cash.
“The cybersecurity levy adds to the list of levies and taxes collected by financial institutions on behalf of the government, including stamp duty, electronic transfer levy, and VAT. This embodiment of taxes increases the transaction costs of using a bank and could disrupt the financial intermediation role of banks.
“Furthermore, given the current strains that citizen face, perceived unfairness, lack of transparency and accountability would heighten distrust in the financial system. The NESG, therefore, suggests the need to reduce banks’ transaction costs, signal clarity to improve trust in the financial system and to entice people to become financially included. For instance, the high transfer costs charged by the official channel (banks) have prompted many Nigerian migrants to route remittances via informal channels”, the group added.
