CBN Orders Implementation of 0.5% Levy Fee on all Electronic Transactions

Yesterday, the Central Bank of Nigeria ordered the new implementation of a 0.5% levy on all electronic transactions as part of its effort to address the high rate of cybercrime in the financial system.

The implementation follows the enactment of the Cybercrime (Prohibition, Prevention, etc.) (Amendment) Act 2024 and pursuant to the provision of Section 44 (2)(a) of the Act, which provided for the rate deduction.

The development was announced in a circular from the CBN on May 6, 2024, forwarded to all commercial, merchant, non-interest, and payment service banks, other financial institutions, Mobile Money Operators, and Payment Service Providers, and jointly signed by the CBN Director, Payments System Management Department, Chibuzo Efobi, and Director, Financial Policy and Regulation Department, Haruna Mustafa.

According to a report, the correspondence also postdates CBN's circulars of  June 25, 2018, and October 5, 2018, on compliance with Cybercrimes (Prohibition, Prevention, etc..) Act 2015.

The apex bank stated that the deducted funds would be remitted to the National Cybersecurity Fund (NCF), administered by the Office of the National Security Adviser (ONSA).

Accordingly, all banks, Other Financial Institutions, and Payments Service Providers are required to implement the new provision of the Act as directed.

The central bank noted that the levy should be applied at the point of electronic transfer origination, then deducted and remitted by the financial institution.

The deducted amount shall be reflected in the customer's account with the narration: "Cybersecurity Levy."

The CBN further clarified that deductions should commence within two weeks from the date of the circular for all financial institutions and the monthly remittance of the levies collected in bulk to the NCF account domiciled at the CBN by the fifth business day of every subsequent month.

The apex bank further directed that system reconfigurations to ensure the complete and timely submission of remittance files to the Nigeria Interbank Settlement System (NIBSS) shall be completed within four weeks of the circular for commercial, merchant, non-interest, Payment Service Banks, and Mobile Money Operators.

Also, Other Financial Institutions (Microfinance banks, Primary Mortgage banks, and Development Finance Institutions) will be required to effect the completion within eight weeks of the circular.

The circular, however, exempted some transactions from cybercrime levy.

They included loan disbursements and repayments, salary payments, intra-account transfers within the same bank or between different banks for the same customer, intra-bank transfers between customers of the same bank, and instructions from Other Financial Institutions (OFIs) to their correspondent banks.

The exemption also applies to interbank placements; banks' transfers to CBN and vice-versa; inter-branch transfers within a bank, cheque clearing and settlements; and Letters of Credit (LCs).

Others include banks' recapitalisation-related funding only bulk funds movement from collection accounts; savings and deposits including transactions involving long-term investments such as treasury bills, bonds; and commercial papers;  government social welfare programs transactions, e.g., pension payments; non-profit and charitable transactions including donations to registered non-profit organisations or charities; educational institutions transactions, including tuition payments and other transaction involving schools, universities, or other educational institutions.

Transactions involving the bank's internal accounts, such as suspense accounts, clearing accounts, profit and loss accounts, inter-branch accounts, reserve accounts, nostro and vostro accounts, and escrow accounts, are also exempt from the levy.

The central bank warned that

Section 44 (8) of the Act prescribes that failure to remit the levy constitutes an offense punishable on conviction by a fine of not less than two percent of the defaulting business's annual turnover, among other things.

All institutions under the CBN's regulatory purview are directed to note and comply with the provisions of the Act and the circular.