CBN backtracks on cybersecurity levy after public outcry

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The Central Bank of Nigeria (CBN) has reversed course on a controversial cybersecurity levy, withdrawing its earlier circular that mandated banks and payment service providers to collect and remit the fee. This decision comes just weeks after the levy’s announcement and subsequent public backlash.

The initial circular, issued on May 6, 2024, stipulated a 0.5% levy on electronic transactions to fund cybersecurity initiatives. However, the policy faced immediate criticism. Many Nigerians expressed concerns about the additional financial burden, particularly considering existing economic challenges. Critics also questioned the transparency surrounding the levy’s allocation and potential effectiveness.

The circular, signed by the Director of Payment Systems Management, Chibuzor Efobi, and the Director of Financial Policy and Regulation Department, Haruna Mustafa, was addressed to commercial banks, payment service providers (PSPs), non-interest banks, and others.

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The circular issued on Sunday was titled, “Re: Cybercrimes (Prohibition, Prevention, Etc.) (Amendment) Act 2024 – Implementation Guidance on the Collection and Remittance of the National Cybersecurity Levy.”

It read, “The Central Bank of Nigeria circular dated May 6, 2024 (Ref: PSMD/DIR/PUB/LAB/017/004) on the above subject refers.

“Further to this, please be advised that the above-referenced circular is hereby withdrawn.”

The public outcry gained traction, culminating in a nationwide outpouring of disapproval. The Nigerian Economic Summit Group (NESG) joined the chorus, urging the government to reconsider the levy due to potential inflationary pressures and double taxation. Faced with mounting pressure, the Federal Government suspended the levy on May 14, 2024.

The CBN’s revised circular, dated May 17, 2024, formally withdraws the previous directive. This move indicates the bank’s acknowledgement of the public’s concerns and its willingness to adapt its approach. However, the future of cybersecurity funding remains unclear.

Analysts suggest several possibilities. The government might explore alternative funding mechanisms, potentially seeking increased budgetary allocation or public-private partnerships. Alternatively, the CBN could revisit the levy concept with a more transparent and consultative approach, addressing concerns about fairness and effectiveness.

The CBN’s decision to withdraw the levy is a significant development, highlighting the importance of public engagement in policy formulation. It remains to be seen how Nigeria will address the crucial issue of cybersecurity funding while ensuring a sustainable and inclusive approach.