Nigerian financial institutions (FIs) and payment service providers (PSPs) are grappling with the recent implementation guidelines for the Cybercrimes (Prohibition, Prevention, etc.) Amendment Act, 2024. The Act mandates these entities to collect a 0.5% levy on all electronic transactions, effectively deducting it from the customer at the point of transaction origination. While the aim – to bolster national cybersecurity – is commendable, questions arise about the impact on institutions and their customers alike.
Impact on Financial Institutions
- Operational Challenges: The on-the-customer levy collection introduces a new operational hurdle for FIs and PSPs. They need to ensure smooth integration into their transaction processing systems.
- Potential Customer Dissatisfaction: Customers already burdened with levies and transaction fees will be further displeased by the sudden implementation of this levy. Clear communication strategies will be crucial to manage expectations.
Impact on Customers
- Direct Cost Increase: The 0.5% levy translates to a direct cost increase for customers on every electronic transaction. This could be particularly burdensome for frequent users or those with limited disposable income.
- Reduced Spending Power: The levy could lead to a decrease in overall digital transaction volume, impacting businesses that rely heavily on online sales.
Get Started with AutoComply to automate your tax and AML compliance
Schedule of exemptions from the cybersecurity levy
- Loan disbursements and repayments
- Salary payments
- Intra-account transfers (both within the same bank and between different banks for the same customer)
- Transfers between customers of the same bank (internal to the bank)
- Instructions from other financial institutions (related to correspondent banking)
- Interbank placements (between banks for liquidity management)
- Transfers between banks and the Central Bank of Nigeria
- Inter-branch transfers within a bank
- Cheque clearing and settlements
- Letters of Credit (used for international trade financing)
- Banks’ recapitalization-related funding (specific to bulk fund movements from collection accounts)
- Deposits and savings transactions (including investments like Treasury Bills, Bonds, and Commercial Papers)
- Government Social Welfare Programme transactions (e.g., pension payments)
- Non-profit and charitable transactions (donations to registered organizations)
- Educational Institutions transactions (including tuition payments)
- Transactions involving the bank’s internal accounts (various accounts used for bank operations)
Looking Ahead
Transparency is paramount. FIs need to clearly communicate how the levy will be reflected in transaction fees. The government, on the other hand, should ensure efficient management of the NCF, with tangible improvements in cybersecurity being demonstrably linked to the levy.
Conclusion
The new levy presents a significant change for Nigeria’s fintech landscape. Effective implementation requires collaboration between the government, FIs, and customers. Finding the right balance between cybersecurity and affordability will determine the ultimate success of this initiative.
Get Started with AutoComply to automate your tax and AML compliance