Peter Obi, the former presidential candidate of the Labour Party has condemned the recently announced Cybersecurity Levy, describing it as ‘‘milking a dying economy.’’

In a statement issued via his X handle on Wednesday, Obi decried the rate President Bola Tinubu’s government is increasing taxes, despite his assurances to address multiple taxation as a way of creating a conducive business environment.

The former Anambra State governor noted that Nigerians are already suffering severe economic distress orchestrated by some policies of the government, including the removal of fuel subsidies and the floating of Nigeria’s foreign exchange market.

‘‘The introduction of yet another tax, in the form of Cybersecurity Levy, 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.

Obi highlighted several key concerns regarding its implications for businesses and the broader economic landscape of Nigeria. His remarks followed the flurry of criticism ignited by the policy, with most pointing at the urgent need for a reevaluation of fiscal policies to safeguard against unintended consequences and ensure the competitiveness of the country’s economic environment.

The two-term former Anambra State governor, who has been a vocal critic of the current government, noted the detrimental impact of the Cybersecurity Levy as a form of multiple taxation on banking transactions. 

He said; ‘‘the Cybersecurity Levy does not only amount to multiple taxation on banking transactions, which are already subject to various other taxes including stamp duties but negates the Government’s avowed commitment to reduce the number of taxes and streamline the tax system.’’

Furthermore, Obi noted the disproportionate impact of the Cybersecurity Levy on businesses’ trading capital, noting that it is levied on capital rather than profits.

‘‘The imposition of a Cybersecurity Levy on bank transactions is particularly sad given that the tax is on the trading capital of businesses and not on their profit hence will further erode whatever is left of their remaining capital, after the impact of the Naira devaluation and high inflation rate,’’ he said.

Speaking further, Obi asserted that as businesses struggle to navigate economic challenges, policies that levy additional taxes on their capital undermine their ability to invest, grow, and create jobs, ultimately impeding economic recovery and development.

‘‘It is inconceivable to expect the suffering citizens of Nigeria to separately fund all activities of the government. Policies such as this not only impoverish the citizens but make the country’s economic environment less competitive,’’ he said.

Obi also questioned the rationale behind diverting funds generated from the Cybersecurity Levy to the Office of the National Security Adviser (ONSA), traditionally associated with national security rather than revenue collection. 

‘‘And when did the office of the NSA become a revenue collecting center?’’ he asked. ‘‘And why should that purely national security office receive returns on a specific tax as stated in the new cybersecurity law?’’

Ultimately, Obi’s remarks reflect broader concerns within the business community and civil society regarding the implications of fiscal policies on economic growth, competitiveness, and public welfare.

Earlier this week, the Central Bank of Nigeria (CBN) issued a directive mandating financial institutions to implement a cybersecurity levy. This levy, set at 0.5% of the value of all electronic transactions, aims to bolster the National Cyber Security Fund overseen by the Office of the National Security Adviser (NSA).

According to the circular released by the apex bank, financial institutions, including banks, mobile money operators, and payment service providers, must begin deducting and collecting the cybersecurity levy within two weeks of the circular’s issuance. The levy will be calculated as 0.5% of the value of all electronic transactions, with the funds directed into the National Cyber Security Fund to enhance Nigeria’s cybersecurity capabilities.

However, this development has not been well-received by Nigerians.

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. 

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.