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A New Levy to Fight Cybercrime: The CBN Mandates 0.5% on Electronic Transactions in Nigeria

Last Updated on May 7, 2024 by Silvy

A New Levy to Fight Cybercrime: The CBN Mandates 0.5% on Electronic Transactions in Nigeria

The Central Bank of Nigeria (CBN) has taken a significant step towards bolstering the country’s cybersecurity defenses by introducing a new levy on electronic transactions. This levy, set at 0.5% of the transaction value, aims to raise funds for the National Cybersecurity Fund (NCF), which will be used to invest in measures that combat the rising threat of cybercrime in Nigeria’s financial system.

The decision to implement this levy comes amidst a backdrop of increasing cybercrime activity in Nigeria. As the nation’s financial landscape embraces digital solutions with growing enthusiasm, it also becomes a more attractive target for cybercriminals. These criminals employ sophisticated tactics to steal financial information, disrupt financial operations, and exploit vulnerabilities in digital infrastructure.

The CBN’s action is anchored in the recently enacted Cybercrime (Prohibition, Prevention, etc) (amendment) Act 2024. Section 44 (2)(a) of the Act empowers the CBN to implement such a levy. A circular issued on May 6, 2024, details the specifics of the levy and its implementation.

Here’s a breakdown of the key points:

  • Levy Rate: 0.5% of the electronic transaction value.
  • Start Date: Within two weeks of the circular’s issuance (May 6, 2024).
  • Collection and Remittance: Financial institutions will deduct the levy at the point of electronic transfer origination. The collected levies will be remitted monthly by the 5th business day to a dedicated NCF account domiciled at the CBN.

The CBN has issued clear directives for all banks, other financial institutions, and payment service providers. These institutions are required to:

  • Implement the new levy as per the Act and the circular.
  • Deduct the levy at the origination point of electronic transfers.
  • Clearly reflect the deducted amount in the customer’s account with a narration stating “Cybersecurity Levy.”
  • Ensure timely and complete submission of remittance files to the Nigeria Interbank Settlement System (NIBSS).

The timeframe for system reconfiguration to facilitate remittance filing varies depending on the type of institution:

  • Commercial, Merchant, Non-interest and Payment Service Banks, Mobile Money Operators: Four weeks from the circular date.
  • Other Financial Institutions (Microfinance, Primary Mortgage, Development Finance): Eight weeks from the circular date.

The CBN recognizes that not all electronic transactions require inclusion under this levy. Here’s a list of exempt transactions:

  • Loan disbursements and repayments.
  • Salary payments.
  • Intra-account transfers (same or different banks for the same customer).
  • Interbank placements and transfers between CBN and banks.
  • Government social welfare programs (pensions).
  • Non-profit and charitable transactions (donations to registered organizations).
  • Educational institutions transactions (tuition payments, etc.).
  • Certain internal bank account transactions (suspense, clearing, profit and loss, etc.).

The introduction of this levy is likely to have a two-pronged effect. On the one hand, it will generate funds for the NCF, allowing for investments in critical areas like cybersecurity infrastructure upgrades, personnel training, and public awareness campaigns. On the other hand, it may introduce a small additional cost for consumers and businesses that rely heavily on electronic transactions.

The success of this initiative will depend on several factors:

  • Transparency and Accountability: Clear communication regarding the use of NCF funds for cybersecurity initiatives is crucial to ensure public trust and support.
  • Efficiency in Collection and Remittance: Timely and efficient collection and remittance of the levy by financial institutions is essential to maximize the impact on cybersecurity efforts.
  • Minimizing the Burden on Consumers and Businesses: The CBN may need to continuously evaluate the impact of the levy and consider adjustments if it disproportionately burdens specific segments of the population.

The CBN’s initiative to address cybercrime through a levy on electronic transactions is a commendable step. While it may introduce a minor cost, the long-term benefits of a more secure financial system outweigh this consideration. The success of this initiative hinges on a collaborative effort between the CBN, financial institutions, and the public. By working together, stakeholders can build a robust cybersecurity shield for Nigeria’s flourishing digital financial ecosystem.

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