Business

Banks To Begin Deduction Of Cybersecurity Levy

Failure to comply and remit within the specified timeframe will result in a penalty equivalent to two percent of the institution’s annual turnover.

By Johnson Atoukudu

The Central Bank of Nigeria (CBN) has instructed all financial institutions in the nation to initiate the deduction of a cybersecurity levy on electronic transactions starting from May 20, 2024, six years after the initial directive was issued. These deductions are to be transferred to the National Security Fund, overseen by the Office of the National Security Adviser (ONSA).

The levy applies to electronic transactions conducted through various financial entities such as commercial banks, merchant banks, non-interest banks, payment system banks, Other Financial Institutions (OFIs), mobile money operators, and payment service providers. Failure to comply and remit within the specified timeframe will result in a penalty equivalent to two percent of the institution’s annual turnover.

In a circular jointly signed by the CBN’s director of payments systems management, Chibuzor Efobi, and Director of Financial Policy and Regulation, Haruna Mustafa, dated May 6, 2024, banks are directed to commence deductions for subsequent remittance. This follows the release of guidelines by the apex bank on June 25, 2018, for the collection of a 0.005 percent levy on electronic transactions for the National Cybersecurity Fund, initially scheduled to commence from July 1, 2018, but did not materialize.

According to the circular, following the enactment of the Cybercrime (Prohibition, Prevention, etc) (amendment) Act 2024 and pursuant to the provision of Section 44 (2)(a) of the Act, “a levy of 0.5% (0.005) equivalent to a half percent of all electronic transactions value by the business specified in the Second Schedule of the Act”, is to be remitted to the National Cybersecurity Fund (NCF), which shall be administered by the Office of the National Security Adviser (ONSA).

“Accordingly, all Banks, Other Financial Institutions and Payments Service Providers are hereby required to implement the above provision of the Act as follows: The levy shall 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”. Deductions shall commence within two (2) weeks from the date of this 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 5th business day of every subsequent month.

“System reconfigurations towards ensuring complete and timely submission of remittance files to the Nigeria Interbank Settlement System (NIBSS) Plc shall be completed within four weeks of this circular – Commercial, Merchant, Non- Interest and Payment Service Banks; and Mobile Money Operators.

“Within eight weeks of this circular – all Other Financial Institutions (Microfinance banks, Primary Mortgage banks, Development Finance Institutions). Exemptions – To avoid multiple application of the levy on the same transaction/transfer, Appendix 1 (attached) captures transactions currently deemed eligible and are exempted from the application of the levy.

“Section 44 (8) of the Act prescribes that failure to remit the levy is an offence and is liable on conviction to a fine of not less than two per cent of the annual turnover of the defaulting business, amongst others.”

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