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Nigeria’s government is looking to raise cash by requiring financial institutions to contribute to a cybersecurity fund, as the country continues to struggle with high inflation and currency devaluation.

In a circular  this week, the Central Bank of Nigeria (CBN) told regulated payments firms that they must be ready to comply with a new “cybersecurity levy”.

The levy will be set at 0.5 percent of the value of each transaction and will be applied to most domestic transfers. All banks, financial institutions and payment service providers (PSPs) that facilitate domestic transfers will be affected.

In its guidelines for implementation, the central bank said the levy should be applied “at the point of electronic transfer origination” and “deducted and remitted by the financial institution”.

The deducted amount is to be labelled “Cybersecurity Levy” in the customer’s account statements.

The levy will come into force on May 20, when firms must begin making deductions.

Once collected, the levies must be remitted in bulk to an account held by the newly created National Cybersecurity Fund (NCF) by the fifth day of each month.

The NCF will be administered by the Office of the National Security Adviser (ONSA), but its account where the levies will be deposited is at the central bank.

Not all transfers in scope

The provisions for the Cybersecurity Levy are outlined in the Cybercrimes (Prohibition, Prevention, Etc) Amendment Act 2024. This calls for the levy to be applied to “all electronic transactions”, but also includes a long list of exemptions, which are described in an appendix to the circular.

The exemptions include salary payments, loan disbursements and repayments, intra-account transfers by the same customer and transfers between customers of the same bank.

Also exempted are welfare transactions, including pension payments, transfers to charities and non-governmental organisations (NGOs), and transfers to educational institutions.

Failure to comply with the Cybersecurity Levy could result in prosecution and a fine of at least 2 percent of a firm’s annual revenue.

Backlash from Nigerians

The move has drawn criticism from Nigeria’s opposition parties, its payments industry and the general public.

Peter Obi, former governor of Anambra State and third-placed candidate in last year’s presidential election,  the levy is evidence that the government has lost control of the country’s finances.

“The introduction of yet another tax on Nigerians, who are already suffering severe economic distress, is further proof that the government is more interested in milking a dying economy instead of nurturing it to recovery and growth,” he said.

“This does not only amount to multiple taxation on banking transactions, which are already subject to various other taxes, but negates the government’s avowed commitment to reduce the number of taxes and streamline the tax system.”

Obi also noted that the levy will amplify the effects of , which is currently at a 28-year high of 33 percent, and will also worsen the plummeting exchange rate of the naira, which has lost almost 70 percent of its value against the US dollar since June 2023.

“Policies such as this not only impoverish the citizens but make the country’s economic environment less competitive,” he said.

“At a time when the government should be reducing taxes to curb inflation, the government is instead introducing new taxes. And when did the Office of the NSA become a revenue collecting centre?”

������covered by 91����ԭ��, the ONSA has played a central role in addressing the devaluation of the naira — a crisis that the agency blames primarily on capital flight and rampant speculation facilitated by Binance.

It was also the ONSA that gave the order for two Binance executives to be detained after they flew to Nigeria to negotiate a compliance settlement.

Both executives are now facing criminal charges that include money laundering and tax evasion.

Other groups have also strongly opposed the Cybersecurity Levy. The Socio-Economic Rights and Accountability Project (SERAP), an NGO, has  to sue the government of President Bola Tinubu if the plans are not withdrawn within 48 hours.

“The repressive provisions of the Cybercrimes Act 2024 are clearly inconsistent and incompatible with the public trust and the overall objectives of the Constitution,” it said.

Central bank overreach

The Cybersecurity Levy is not the only central bank intervention that has angered Nigerians in recent months.

In December last year, the CBN announced plans to introduce a new 2 percent “processing fee” on cash deposits by individuals and business accounts.

Individuals would be subject to the processing fee when making deposits of N500,000 ($350) or more, while businesses would be subject when making deposits of N3m ($2,100) or more.

However, the CBN this week  that the introduction of the fee will be postponed until September 30, 2024.

“Consequently, all financial institutions regulated by the CBN should continue to accept all cash deposits from the public without any charges,” it said.