The Centre for the Promotion of Private Enterprise (CPPE) has raised alarm over the adverse effects of the newly introduced cybersecurity levy and a barrage of other taxes imposed by various tiers of government in Nigeria.
In a statement signed by Dr. Muda Yusuf, the CEO of CPPE, concerns were raised regarding the detrimental impact of these levies on the capacity of businesses to stimulate economic growth, leading to job losses and inflationary pressures across the nation.
Dr. Yusuf highlighted the burden imposed by the cybersecurity levy, noting its potential to exacerbate hardship for citizens and hinder investment prospects. He pointed out that businesses and investors are already grappling with a plethora of taxes, including education tax, value-added tax (VAT), company income tax (CIT), stamp duty, and various other levies.
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The introduction of yet another levy contradicts the objectives of streamlining taxes, as advocated by the Presidential Committee on Fiscal Policy and Tax Reforms.
“Businesses and the generality of citizens are yet to recover from the shocks of current reforms. Inflationary pressures have not abated, high cost of living is still a major worry, operating and production costs for businesses remain elevated, amidst weak consumer purchasing power. This is not a good time to impose an additional levy both on businesses and citizens,” he said.
“Meanwhile, businesses are already saddled with the following federal taxes: Company Tax, Tertiary Education Tax, Stamp Duties, NITDA levy, Value Added Tax, NASENI Levy, Police Trust Fund Levy, among others. Still in works are NYSC Levy and Tertiary Health Levy. There are also a plethora of taxes and levies imposed by states and local governments.”
Furthermore, Dr. Yusuf raised concerns regarding the projected revenue generation from the levy, questioning the rationale behind the proposed amount. With electronic payment transactions amounting to N600 trillion in 2023, a 0.5% deduction would translate to N3 trillion, surpassing the budget allocated for infrastructure in the 2024 Appropriations Act. Such exorbitant figures raise doubts about the feasibility and sustainability of the levy’s implementation.
Moreover, Dr. Yusuf warned against the unintended consequences of such levies, noting that they could undermine the cashless policy drive spearheaded by the Central Bank of Nigeria (CBN) and potentially drive individuals towards cash-based transactions, negating efforts to promote financial inclusion and combat illicit financial activities.
The backdrop of these concerns lies in the recent mandate issued by the CBN, compelling banks and payment service providers to deduct 0.5% of the total value of electronic transactions and remit the proceeds to the National Cybersecurity Fund, managed by the Office of the National Security Adviser (ONSA).
While ostensibly aimed at boosting cybersecurity efforts in line with the Cybercrime Act of 2024, the imposition of additional levies further strains businesses already grappling with financial burdens.
The concerns raised by the CPPE echo broader apprehensions within the business community regarding the potential ramifications of such fiscal measures. Beyond the immediate economic impacts highlighted by Dr. Yusuf, the cybersecurity levy carries multifaceted implications that warrant careful consideration.
Business leaders have warned that the imposition of additional taxes and levies, including the cybersecurity levy, adds to the administrative burden faced by businesses, particularly small and medium enterprises (SMEs). Compliance with complex tax regulations requires significant resources in terms of time, manpower, and financial investment, diverting attention and resources away from core business activities. For SMEs operating on thin profit margins, the added cost of compliance could stifle growth prospects and inhibit job creation, exacerbating unemployment and dampening economic productivity, they warn.
Furthermore, the cybersecurity levy introduces uncertainties surrounding its utilization and effectiveness in addressing cybersecurity challenges. While boosting cybersecurity infrastructure is undoubtedly crucial in an increasingly digitalized world, questions linger regarding the transparency and accountability of funds allocated to the National Cybersecurity Fund.
Without clear mechanisms for oversight and evaluation, anti-graft advocates warn that there is a risk of mismanagement or misallocation of resources, undermining the intended objectives of the levy and eroding public trust in government initiatives.
Moreover, the cybersecurity levy intersects with broader policy objectives related to financial inclusion and digital transformation. Nigeria has been actively promoting initiatives to expand access to financial services and promote cashless transactions as part of efforts to foster inclusive growth and enhance economic resilience.
However, the imposition of levies on electronic transactions runs counter to these objectives, potentially disincentivizing individuals and businesses from embracing digital payment platforms. This, many believe, could impede progress toward achieving universal financial access and drive a resurgence in cash-based transactions, perpetuating inefficiencies in the financial ecosystem and hindering efforts to combat illicit financial activities.
Additionally, experts have noted that the cybersecurity levy underscores the need for a coordinated approach to cybersecurity governance and collaboration between public and private stakeholders. They say that effective cybersecurity requires not only financial investment but also robust regulatory frameworks, capacity-building initiatives, and public awareness campaigns.
This means that the success of cybersecurity initiatives hinges significantly on the ability to foster synergies between government agencies, industry associations, and technology providers to address evolving threats and vulnerabilities in cyberspace.
In light of these considerations, the CPPE’s call for the suspension of the cybersecurity levy and stakeholder deliberation on its implementation resonates with broader calls for evidence-based policymaking and holistic approaches to fiscal reform.