In a sudden move, Nigeria’s central bank has retracted a contentious 0.5% cybersecurity levy on electronic transfers, just three days before its scheduled implementation. The levy, which was introduced following an amendment to the Cybersecurity Act in 2024, aimed to broaden its scope to include fintechs, payment service providers, and other financial institutions, marking a significant 900% increase from its previous rate of 0.005%.
A circular signed by Chibuzo Efobi, director of the central bank’s payment system management team, and Haruna Mustafa, director of financial policy and regulation, formally withdrew the levy. The decision comes amid widespread criticism from financial experts who deemed the levy “regressive,” particularly in light of Nigeria’s highest inflation rate in thirty years and a prevailing cost of living crisis.
The levy, which would have imposed an additional charge on electronic transactions, faced mounting opposition, prompting the federal government to suspend its implementation pending a review on Tuesday. The move was met with relief, especially among individuals like Ope, an online phone seller, who rely heavily on electronic transfers for daily transactions. Ope expressed concerns over the levy’s impact, noting that it would have compounded existing charges, including stamp duty, SMS fees, and charges from the national payment switch.
Despite exceptions for certain transactions, such as intra-bank transfers, salary payments, and school fees, the levy threatened to escalate the cost of electronic transactions for millions of Nigerians. Its removal signifies a welcome relief for individuals and businesses alike, who increasingly depend on electronic transfers as their primary mode of payment.
The decision is particularly significant given the rising prominence of electronic transactions in Nigeria’s financial landscape. Paystack, a leading Nigerian fintech company, reported a significant uptick in bank transfers, which accounted for over half of the transactions processed in 2023. The value of electronic transactions in Nigeria surged by 66% in the same year, surpassing ₦600 trillion—a testament to the growing reliance on digital payment solutions across the country.
NewsAnalytrics Analysis of Nigeria’s Central Bank Cybersecurity Levy Reversal
- Economic Impact: The decision to withdraw the cybersecurity levy on electronic transfers reflects an understanding of the economic challenges facing Nigeria, including high inflation and a cost of living crisis. The levy’s removal alleviates financial burdens on individuals and businesses, fostering a more conducive environment for economic transactions.
- Consumer Relief: Nigerians, particularly those who heavily rely on electronic transfers for daily transactions, will experience immediate relief from the additional charges imposed by the cybersecurity levy. This is especially significant given the compounding effect of multiple transaction fees, which threatened to strain already stretched budgets.
- Regulatory Response: The central bank’s reversal underscores the importance of regulatory responsiveness to public concerns and market dynamics. The swift withdrawal of the levy in response to widespread criticism demonstrates a willingness to adapt policies in light of evolving circumstances, enhancing regulatory credibility.
- Digital Payment Trends: The surge in electronic transactions in Nigeria, as evidenced by the significant growth reported by fintech companies like Paystack, highlights the increasing digitization of financial services in the country. The removal of the cybersecurity levy reinforces the role of electronic payments as a cornerstone of Nigeria’s financial ecosystem.
- Policy Review: The suspension of the levy pending a review suggests a willingness to reassess regulatory measures in consultation with stakeholders. The upcoming review presents an opportunity to refine the cybersecurity levy framework, taking into account feedback from industry experts, businesses, and consumers.
- Business Implications: Fintechs, payment service providers, and financial institutions will need to adjust their strategies in response to the levy’s reversal. While the removal of the levy may alleviate financial burdens on consumers, it could impact revenue streams for these entities, necessitating alternative approaches to sustain growth and profitability.
Overall, the central bank’s decision to withdraw the cybersecurity levy reflects a balancing act between regulatory objectives, economic realities, and stakeholder interests. Moving forward, stakeholders will closely monitor developments as the levy undergoes review, shaping the trajectory of digital payments and regulatory policies in Nigeria.
