Nigeria is truly struggling to contain the rate of internet fraud and other cyber crimes in the country. Many individuals have fallen victim to monetary scams perpetuated online, and alongside financial fraud, numerous illicit activities exist and thrive in the digital realm.
The prevalence of these activities presents a significant risk to investments. Many individuals are scared of investing especially when the investment involves the internet, due to concerns of being defrauded. Consequently, this scenario creates a major challenge for legitimate online investment platforms and underscores the importance of cybersecurity measures.
In response to this imperative, regional and international entities have implemented initiatives and regulations to tackle fraud and other crimes on the internet space. Several other countries have enacted laws and launched initiatives to safeguard their respective cyberspaces
As part of its efforts to combat cybercrimes, Nigeria has enacted the Cybercrimes (Prohibition, Prevention, etc.) Act 2015, amended in 2024. Section 44 (2)(a) of the Act stipulates a levy of 0.5% (0.005), equivalent to half a percent, on the value of all electronic transactions conducted by businesses specified in the Second Schedule of the Act. This measure aims to bolster the security framework of financial operations nationwide.
But despite the grave concerns for cybersecurity, the imposition of this levy on private individuals has sparked public criticism due to the substantial amount levied on Nigerians. Questions arise as to why the government would place such a burden on private individuals for a matter of national importance. Ensuring national security is the responsibility of the government, not private individuals and businesses. This criticism highlights the lack of consideration for the implications of imposing such a levy on electronic transactions, particularly its impact on workers and vulnerable segments of society, rendering it unjustifiable.
The imposed levy threatens the viability of businesses and investments in Nigeria. It stands at 0.5% on electronic transactions, translating to a 5,000 naira charge for every 100,000 transaction and 50,000 naira for every 1 million transaction.
In addition to this levy, businesses in Nigeria already contend with numerous other taxes collected by the government, including Company Tax, Tertiary Education Tax, Stamp Duties, NITDA levy, Value Added Tax, NASENI Levy, Police Trust Fund Levy etc.
Effect of the levy on businesses
Companies are already grappling with an increasingly burdensome tax regime, which severely impacts their profit margins and places significant pressure on investors in the economy. Diminishing their ability to spur economic growth, create jobs, and exacerbates inflationary pressures.
Both businesses and the general public are still reeling from the effects of recent reforms. Inflation remains high, the cost of living is a major concern, and operating and production costs for businesses continue to rise. Coupled with weak consumer purchasing power, the introduction of an additional levy will further weigh down businesses and the economy. The magnitude of this levy only compounds the existing concerns.
The cybercrime levy is particularly concerning as it targets electronic transactions rather than profits. It disregards the financial health of businesses, holding even loss-making companies accountable. Furthermore, it does not exempt the less financial capable segments of society.
This levy not only undermines the Nigerian government’s efforts to attract foreign investment but also discourages individuals from utilizing electronic transactions, potentially leading to a resurgence in cash transactions. This shift poses security risks and creates opportunities for cybercriminals to transition into physical crime.
Moreover, the imposition of this levy contradicts the expectations of citizens and corporate organizations for a rationalized and streamlined tax system, as promised by the Presidential Committee on Fiscal and Tax Reforms. The announcement of the cybercrime levy highlights a deviation from earlier assurances provided by the committee.
In conclusion, the introduction of the cybercrime levy exacerbates the burden on businesses, dampens investor confidence, and contradicts the government’s commitment to fostering a conducive business environment.
Therefore, emphasising the need for policymakers to reconsider the implications of such levies on economic growth and security.
