After news broke that all electronic transactions will be subject to a 0.5% cybersecurity levy, analysis of how much X will be charged for transfers of different amounts has been trending.
This post below assumes that an individual transferring £10 million will pay a cybersecurity tax of £50,000.
However, the circular issued by the Central Bank of Nigeria (CBN) did not state that individuals would be required to pay this levy. Here are his six questions about why the levy was created and its goals.
Who pays the 0.5% cybersecurity tax?
According to the circular, “a levy of 0.5% (0.005) equal to 0.5% of the value of electronic transactions by all operators specified in Schedule 2 of the Act.” [Cybercrime Act 2024]. ”
This means that the levy only targets businesses specified by law.
Which businesses does this tax apply to?
As stated in the circular, according to the Second Schedule of the Act, the companies that pay this levy are:
- telecommunications company
- internet service provider
- Banks and other financial institutions
- Insurance company
- nigeria stock exchange
How do these companies pay cybersecurity taxes?
According to the law, the levy will be paid directly by affected companies into a fund “controlled by the central bank within 30 days.”
However, according to the CBN circular, the levy paid to the National Cyber Security Fund is to be paid by the financial institutions with which these companies do business.
Now you understand a little more about how taxes are deducted.
“All banks and other financial institutions and payment service providers are required to implement the above provisions of the Act as follows:
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The levy will be applied at the time the electronic transfer is initiated and will be deducted and transferred by the financial institution.
The deducted amount will be reflected in the customer's account along with the cybersecurity tax narration. ”
Why was the National Cybersecurity Fund established?
The National Cybersecurity Fund (NCF) was established in 2015 as part of the Cybersecurity Act 2015.
This law was a framework to prevent and prosecute perpetrators of cybercrime in Nigeria. The CBN circular is a way to implement his NCF bit of a nine-year-old law.
Similarly, the Nigerian Interbank Settlement System (NIBSS) has issued a circular directing banks to remove non-deposit-taking financial institutions from their transfer list.
Although banks were never allowed to do this, the circular re-implemented the NIBSS position.
What is NCF used for?
The law does not specify how the NCF will be used, but it does state that “an amount not to exceed 40% of the fund may be allocated to programs related to countering violent extremism.”
However, the use of the funds will ultimately be determined by the Office of the National Security Advisor (ONSA).
Is cybersecurity tax imposed on all electronic transactions?
Not all financial transactions by publicly traded companies are subject to cybersecurity tax. According to the CBN, the following transactions are exempt:
- salary payment
- Loan execution and repayment
- Intrabank transfers between customers of the same bank
- Intra-account transfers to the same customer within the same bank or between different banks
- letter of credit
- Treasury bills and government bonds
- commercial paper
- government social welfare programs
- Charitable donations and tuition payments
- Transactions involving educational institutions
