President Bola Tinubu has instructed the Central Bank of Nigeria to pause the enforcement of the contentious cybersecurity levy policy and to conduct a review. This directive came after the House of Representatives’ decision last Thursday, urging the CBN to retract its directive instructing all banks to initiate a 0.5 percent cybersecurity levy on electronic transactions nationwide.
On May 6, 2024, the CBN issued a circular mandating all banks, mobile money operators, and payment service providers to enforce a new cybersecurity levy in accordance with the provisions outlined in the Cybercrime (Prohibition, Prevention, etc) (Amendment) Act 2024. As per the Act, a levy equivalent to 0.5 percent of the value of all electronic transactions is to be collected and transferred to the National Cybersecurity Fund, overseen by the Office of the National Security Adviser.
Financial institutions are mandated to apply the levy at the origin of electronic transfer transactions. The deducted amount must be clearly identified in customer accounts as “Cybersecurity Levy” and remitted by the financial institution. All financial institutions are required to commence levy implementation within two weeks from the issuance of the circular.
Consequently, the deduction of the levy by financial institutions is slated to commence on May 20, 2024.
owever, financial institutions are required to consolidate their remittances to the NCF account domiciled at the CBN by the fifth business day of each subsequent month.
Furthermore, the circular outlines specific timelines for financial institutions to reconfigure their systems to ensure the complete and timely submission of remittance files to the Nigeria Interbank Settlement Systems Plc as follows: “Commercial, Merchant, Non-Interest, and Payment Service Banks – Within four weeks of the issuance of the Circular.
For all other Financial Institutions (Microfinance Banks, Primary Mortgage Banks, Development Financial Institutions) – Within eight weeks of the issuance of the Circular,” the circular highlights.
The CBN underscores strict adherence to this directive, cautioning that any financial institution failing to comply with the provisions will face severe penalties. Non-compliant entities, as stated in the Act, are subject to a minimum fine of two percent of their annual turnover upon conviction.
The circular also enumerates transactions currently considered eligible for exemption to prevent duplicative application of the levy. These include loan disbursements and repayments, salary payments, intra-account transfers within the same bank or between different banks for the same customer, and intra-bank transfers between customers of the same bank.
Exemptions encompass transfers from other financial institutions to their correspondent banks, interbank placements, bank transfers to CBN and vice versa, inter-branch transfers within a bank, cheque clearing and settlements, letters of credit, and bank recapitalization-related funding.
Other transactions excluded from the levy encompass bulk funds movements from collection accounts, savings, and deposits, including transactions related to long-term investments such as treasury bills, bonds, and commercial papers, as well as government social welfare programs transactions. These may entail pension payments, non-profit and charitable transactions, including donations to registered non-profit organizations or charities, transactions with educational institutions, such as tuition payments, and other dealings involving schools, universities, or educational institutions, as well as transactions involving the bank’s internal accounts, inter-branch accounts, reserve accounts, nostro and vostro accounts, and escrow accounts.
The introduction of the new levy elicited diverse reactions among stakeholders due to its potential to increase the cost of doing business in Nigeria and potentially impede the growth of digital transaction adoption.
‘Cease levy immediately’
On Thursday, members of the House of Representatives urged the Central Bank of Nigeria to retract the circular instructing financial institutions to initiate the implementation of the 0.5 percent cybersecurity levy, deeming it “ambiguous.”
This development stemmed from a motion on the urgent necessity to halt and revise the implementation of the cybersecurity levy, presented by Kingsley Chinda.
The House called for the withdrawal of the initial circular by the CBN and the issuance of a more comprehensible one.
Chinda brought the House’s attention to the various interpretations of the CBN directive vis-à-vis the specifications in the Cybersecurity Act.
The House expressed concern that the Act might be implemented erroneously if immediate action was not taken to address the uncertainties surrounding the interpretation of the CBN directive and the Cybersecurity Act.
However, sources familiar with Tinubu’s stance on the matter informed Sunday PUNCH that the President acknowledged the economic strain on Nigerians since the inception of his rigorous economic reforms last May. They added that he was reluctant to exacerbate the burden with additional levies.
A senior presidency official, who preferred anonymity, informed our correspondent, “The President is attuned to the sentiments of Nigerians. He is unwilling to proceed with implementing a policy that adds to the people’s burden.
Therefore, he has requested the CBN to postpone that policy and initiate a review. I would have said he directed the CBN, but that is not appropriate because the CBN is autonomous. However, he has asked the CBN to postpone it and reconsider.”
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