On May 6, 2024, the Central Bank of Nigeria (CBN) issued a directive for banks and other financial institutions to start deducting a cybersecurity levy. This levy, set at 0.5% of the value of all electronic transactions, was introduced under the newly enacted 2024 Cybercrime (Prohibition, Prevention, etc.) Amendment Act, which is intended to fund national cybersecurity efforts managed by the Office of the National Security Adviser.
The introduction of the levy has caused confusion among the public due to a discrepancy in the percentage rate between the previous and the current legislation. This confusion has sparked discussions around the need for clearer communication regarding the policy and potential revisitation of the legislation.
The 0.5% levy on electronic transactions represents an additional financial burden for individuals and businesses alike. For individuals, particularly those who rely heavily on digital payments, this additional cost may affect their ability to carry out daily transactions and could lead to a preference for cash transactions.
For businesses, especially small and medium-sized enterprises (SMEs), the levy may increase operational costs. These businesses may need to adjust their pricing structures to accommodate the new charge, which could result in higher prices for consumers.
Critics have expressed concerns about the lack of clear communication regarding the levy and its implementation. This has led to confusion and uncertainty, both among the general public and within the financial sector. Clearer communication from the CBN and other relevant authorities is essential to alleviate concerns and ensure a smooth transition to the new policy.
Moreover, the potential impact on the financial sector and the economy has led to calls for revisitation of the legislation. Policymakers must consider whether the levy rate is appropriate and whether alternative measures could achieve the same goals without placing undue burden on individuals and businesses.
While the cybersecurity levy aims to fund national cybersecurity efforts, it is crucial to strike a balance between funding these initiatives and minimizing the burden on the public and businesses. Strengthening Nigeria’s cybersecurity infrastructure is essential for protecting the country from cyber threats and promoting economic growth.
To achieve this, the government must prioritize transparency and accountability in the management of cybersecurity funds. Ensuring that the funds are used efficiently and effectively can help build public trust and support for the levy.
The introduction of the 0.5% cybersecurity levy by the CBN has sparked discussions around its impact on the public and businesses in Nigeria. While the levy aims to fund important national cybersecurity efforts, the government must address concerns regarding clear communication and the potential burden on the economy. By doing so, Nigeria can work towards a secure digital future while minimizing disruptions to its citizens and businesses.
Impact on Digital Economy: The levy could potentially slow the growth of Nigeria’s digital economy. Digital payments have been on the rise, contributing significantly to financial inclusion and economic efficiency. An additional charge might discourage the use of digital payment platforms, which could set back progress made in the digital financial ecosystem. According to Techpoint Africa, the levy could deter digital payment adoption.
SME Adaptation: Small and medium-sized enterprises, which are often more sensitive to additional costs, might face significant challenges. These businesses operate on thin margins, and the levy might force them to pass on the cost to consumers, affecting their competitiveness and customer base. The Premium Times has highlighted the potential impact on SMEs.
Public Perception and Trust: Public trust in financial institutions and government policies is crucial for economic stability. Miscommunication and confusion regarding the levy can erode this trust, making it harder for future policy implementations. Clear, transparent communication from the CBN and the government can mitigate these concerns. The Guardian Nigeria emphasizes the need for clear communication on new policies.
Efficiency of Cybersecurity Investments: The effectiveness of the levy in enhancing national cybersecurity depends on the transparent and efficient use of the funds. Public reports on how the levy funds are being utilized can help build trust and demonstrate the benefits of the levy. Ensuring that the funds are directed towards critical cybersecurity infrastructure and capacity-building initiatives will be key. As reported by Cyber Security News, transparency in fund management is essential.
Global Best Practices: Nigeria can look to global best practices in implementing such levies. Countries that have successfully introduced similar measures often pair them with extensive stakeholder consultations, clear communication strategies, and robust frameworks for accountability and transparency. The World Bank provides insights on best practices for funding cybersecurity initiatives.
Awaje Caleb
Awaje Caleb is the Director of Research and Innovations at Cheetahs Policy Institute. With a background in pharmacy and project management, Caleb leads cutting-edge research and drives innovative policy solutions to address critical societal issues.