The levy was expected to raise about 3 trillion naira (approximately US $1.9 billion) annually. However, there are fears that its implementation could drive people to use cash or checks instead of electronic transactions, undermining the policy’s intent
The Nigerian government has suspended its plan to fund national cybersecurity improvements through a 0.5 per cent levy on domestic electronic transactions, following widespread public criticism over increased taxes during a severe economic downturn. President Bola Tinubu pledged to block the tax after public outcry, and on May 14, a senior cabinet member confirmed the suspension.
“The cybersecurity tax policy implementation has been directed by the government to be put on hold, so it has been suspended,” Information Minister Mohammed Idris stated.
As one of Africa’s top three economies, alongside South Africa and Egypt, Nigeria is currently facing its most significant economic crisis in decades. The country is grappling with over 30 per cent annual inflation, declining international investment, and rising living costs, leaving many Nigerians struggling to afford basic necessities. The proposed cybersecurity tax would have added to these burdens.
Wale Ajayi, a partner at consultancy KPMG, noted that while the goal of the levy was to secure funding for combating cyber threats, the current economic climate makes its implementation unfeasible. “The key objective of the cybercrime levy is to ensure that there is dedicated and adequate funding available to address the growing threats of cyber-attacks,” he stated. “However, consideration must be given to the country’s prevailing economic conditions. The current economic climate does not justify its implementation now.”
The suspension comes as Nigeria aims to improve its cybersecurity infrastructure through initiatives like the Virtual Cyber Hub and the Cybersafe Foundation. Historically, the country has been a hotspot for cybercrime, particularly social engineering scams. The poor economy could exacerbate these risks, as highlighted in Deloitte’s Nigeria Cybersecurity Outlook 2024, which warns of a potential increase in cyber-related financial crimes due to economic desperation.
The Cyber Security Experts Association of Nigeria (CSEAN) reported a rise in ransomware attacks in 2023, a trend expected to continue into 2024. The lack of funding could hinder efforts to protect public organizations, many of which were found to be using vulnerable legacy systems last year.
The cybersecurity levy, proposed in 2015, was intended to provide essential funding for bolstering Nigeria’s cybersecurity defenses. In May, the Central Bank of Nigeria directed financial institutions to begin collecting the 0.5 per cent fee on electronic transactions. However, concerns about the economic impact and a lack of transparency in how the funds would be used have led to its suspension.
KPMG’s Ajayi emphasised the need for transparency and gradual tax reforms to avoid economic shocks. “Combining revenue-raising initiatives with responsible spending practices is essential for fiscal sustainability,” he said. “It is also important that government consider phasing in tax reforms on a gradual basis to minimize potential shocks to the economy.”
The levy was expected to raise about 3 trillion naira (approximately US $1.9 billion) annually. However, there are fears that its implementation could drive people to use cash or checks instead of electronic transactions, undermining the policy’s intent.
As Nigeria navigates its economic challenges, the path to improving cybersecurity remains uncertain. Balancing the need for robust cyber defences with the country’s economic realities will be crucial in the coming months.
