The Effects Of CBN Cybersecurity Levy On Nigerians -By Egbuta Elizabeth Chibuzor

The introduction of the 0.5% cybersecurity levy on electronic transactions by the Central Bank of Nigeria (CBN) has gained a lot of mixed reactions. On May 6, 2024, the CBN announced a new policy mandating financial institutions to implement the cybersecurity levy, set at 0.5% of all electronic transaction values, in accordance with the 2024 Cybercrime (Prohibition, Prevention, etc.) Amendment Act.

While the CBN says that the levy is intended to enhance the nation’s cybersecurity infrastructure and protect its burgeoning digital economy, the move has continued to gather debate among stakeholders. This work explores the multifaceted impact of the cybersecurity levy on Nigerians, examining its potential to discourage electronic banking, increase financial burdens, and its implications within the broader economic aspect of the country.

The CBN’s decision to adopt a cybersecurity levy is rooted in the need to address the growing concerns of cyber threats in an increasingly digitalized economy. Cybersecurity measures are imperative in safeguarding sensitive information and ensuring the integrity of electronic transactions. Nevertheless, the imposition of a levy on these transactions raises questions about the cost-benefit balance, particularly for consumers and small businesses in Nigeria.

One of the primary concerns is that it will discourage electronic banking usage. Nigeria has made great strides in promoting financial inclusion and the adoption of digital financial services. The levy, however, could reverse this progress by making electronic transactions less attractive due to the additional costs. This is a problem which may lead to a regression to cash-based transactions, which are less secure and more difficult to track, thereby potentially increasing the risk of financial crimes, robbing and corruption.

Also, the levy imposes an increased financial burden on Nigerians who are already facing great economic challenges such as high inflation and unemployment. The small percentage of 0.5% can accumulate to a substantial amount over time, affecting those with lower incomes and small businesses they are operating. This could exacerbate the economic, divide and hinder the growth of the digital economy in the country.

The timing and economic context of the levy’s introduction are also of great concern. With Nigeria facing already having economic challenges, including subsidy removals and electricity shortages, the additional financial from the levy could have big consequences. Businesses, particularly those reliant on electronic transactions, may see reduced profits, which could lead to downsizing or closure, further fueling the unemployment situation of the country.

In addition, the cumulative effect of bank charges in Nigeria cannot be overlooked. Bank customers are already contending with many charges which include; SMS Alert Fees, Transfer Fees, Card Maintenance Fees, USSD Charges and other fees.

The addition of the cybersecurity levy adds more layer to an already complex fee structure. This could lead to a decline in the use of digital banking services, as customers seek to avoid these charges. The resultant shift away from electronic transactions could undermine the efforts to strengthen cybersecurity, as it may lead to increased reliance on less secure transaction methods.

Furthermore, it also has effect on Financial Institutions. Financial institutions are the primary targets of the CBN cybersecurity levy. These institutions are required to pay a percentage of their total transaction value as a contribution to the cybersecurity fund. This levy is expected to increase the cost of doing business for financial institutions, which may lead to higher fees for customers and reduced services.

If banks for instance increase their charges for services such as account maintenance, transactions, and other financial activities. This could negatively impact the financial well-being of individuals and small businesses that rely heavily on these services.

Moreover, it affects Small and Medium-Sized Enterprises (SMEs). Small and medium-sized enterprises (SMEs) are important to the growth and development of Nigeria’s economy. Yet they are often vulnerable to cyber-attacks due to limited resources such as finance. The CBN cybersecurity levy may further lead to higher cost of doing business which could lead to reduced investment, decreased productivity, and even business closures. This could have a ripple effect on the economy, as SMEs are one of the drivers of economic growth in Nigeria.

In light of the above considerations outlined, it is essential for the government to pend the implementation of the cybersecurity levy. A balanced approach needs to be taken into account because of the economic realities of Nigerians is imperative. Though the national security is undoubtedly important, but it should not come at the expense of the economic well-being of the citizens. The government should consider alternative funding mechanisms for cybersecurity initiatives that do not place an undeserved burden on the public.

This can be perfectly done when they engage with stakeholders, financial institutions and businesses to look for a strategy that supports cybersecurity without hindering economic growth. It is only through such a collaborative and thoughtful approach that the country can secure its digital future while ensuring the progress and prosperity of every citizen.