The suspended cybersecurity levy continues to spark a national debate

The suspended cybersecurity levy continues to spark a national debate

President Bola Ahmed Tinubu has directed the Central Bank of Nigeria to suspend the implementation of the cybersecurity levy. The decision was made amid widespread signs of discontent. Here we examine the National Cyber ​​Security Fund, the cyber security levy and the arguments for and against its introduction.

In 2015, Nigeria took a significant step forward in combating cyber threats with the passage of the Cybercrime Act. This legislation established a Cybersecurity Fund to finance various initiatives to strengthen Nigeria’s cybersecurity infrastructure. In addition, the law introduced a cybersecurity levy on the total value of electronic transactions, which is intended to serve as a financial source for the fund. In addition to the levy, the law provides for the following alternative sources of funding to improve Nigeria’s cyber defenses:

  • Grants and support from donors and bilateral and multilateral organizations;
  • Any other amounts accruing to the Fund through gifts, donations, legacies or other voluntary contributions from persons and organizations: Provided that the conditions attached to such gifts, donations, legacies or contributions do not jeopardize the functions of the Agency;
  • The monies appropriated by the National Assembly for the Fund; And
  • Any other monies or assets that may come into the Fund from time to time.

The 2024 Amendment: These changes were made to eliminate ambiguity and strengthen cybersecurity provisions. The amended law established a clear framework for the cybersecurity levy, setting it at 0.5% of the value of electronic transactions. The Central Bank of Nigeria directed financial institutions to begin deducting the levy from May 20, 2024. This directive sparked a public discourse with many people questioning and discussing its potential impact on Nigerian society.

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However, according to the Central Bank of Nigeria, the following transactions are exempt from the levy:

  1. Loan disbursements and repayments
  2. Salary payments
  3. Intra-account transfers within the same bank or between different banks for the same customer
  4. Intrabank transfers between customers of the same bank
  5. Instructions from other financial institutions to their correspondent banks
  6. Interbank placements
  7. Bank transfers to CBN and vice versa
  8. Branch transfers within a bank
  9. Check clearing and settlements
  10. Letters of credit
  11. Recapitalization-related financing of banks – only mass fund movement from collective accounts
  12. Savings and deposits, including transactions in long-term investments such as Treasury bills, bonds, and commercial papers.
  13. Transactions of government social welfare programs, e.g. B. Pension payments
  14. Non-profit and charitable transactions, including donations to registered nonprofit organizations or charities
  15. Educational institution transactions, including tuition payments and other transactions involving schools, universities or other educational institutions
  16. Transactions with internal bank accounts such as suspense accounts, clearing accounts, profit and loss accounts, branch accounts, reserve accounts, nostro and vostro accounts and trust accounts.

Arguments for submission:

  1. Simplicity and ease of administration: A flat levy is easy to administer, reduces bureaucratic hurdles and ensures efficient collection of funds. This streamlines the process for both government agencies and businesses and allows for more effective allocation of resources to cybersecurity initiatives.
  2. Promoting financial inclusion: A flat rate levy is preferable to a progressive rate as it does not discourage individuals from engaging in electronic transactions involving large amounts. This, in turn, supports financial inclusion by ensuring that people of all income levels can participate in the formal financial system without encountering additional barriers. Additionally, a safer cyberspace strengthens trust in the Nigerian financial system and encourages greater participation and trust.
  3. Improving Cybersecurity: Funds generated from the levy are essential to strengthening Nigeria’s cybersecurity defenses. Fighting cybercrime, protecting sensitive data and protecting critical infrastructure requires significant resources. By supporting initiatives such as establishing cybersecurity research centers against violent extremism and supporting graduate internships in cybersecurity, the levy can help build a skilled workforce and effectively combat emerging cyber threats.

Arguments against the levy:

  1. Impact on low-income earners: Critics raise concerns about the potential burden of the levy on low-income earners. The additional financial burden on vulnerable sections of society could exacerbate existing socio-economic inequalities and make it more difficult for them to access financial services and participate in the economy.
  2. Timing and economic challenges: Introducing the levy at a time of economic challenges may place additional burdens on businesses and consumers. Some fear increased business costs will be passed on to consumers, adding to inflationary pressures and hampering economic recovery efforts.
  3. Need for balance: Critics have emphasized the importance of balancing cybersecurity priorities with socioeconomic realities. Although cybersecurity is undoubtedly crucial, policy measures must take into account its potential socio-economic impact. taking into account the needs of low-income earners and the broader economic context.

Furthermore, the effective implementation of the cybersecurity levy depends on robust oversight mechanisms and transparent management of the cybersecurity fund. In accordance with the Cybercrime Act, the Fund is based at the Central Bank of Nigeria with the Office of the National Security Adviser responsible for administration, maintaining account records and monitoring compliance. In addition, strict audit protocols established by the Auditor General of the Federation ensure accountability and transparency in the use of funds.

As Nigeria grapples with the challenges of its cybersecurity landscape, the cybersecurity levy debate highlights the delicate balance between security imperatives and socioeconomic justice. While the levy holds promise for strengthening Nigeria’s cyber defenses, it is important to carefully manage its potential impact on the average Nigerian. Therefore, developing effective policies to secure Nigeria’s digital future requires ongoing dialogue, stakeholder engagement and rigorous oversight to uphold the principles of fairness and inclusiveness. Through these concerted efforts, Nigeria can pave the way to a resilient and secure digital ecosystem for all.