By Stanley Onyeka, Lagos
The Socio-Economic Rights and Accountability Project (SERAP), BudgIT, and 136 other individuals have sued the Central Bank of Nigeria (CBN) over its failure to withdraw the Cybersecurity Levy.
A statement yesterday, signed by the Deputy Director of SERAP, Kolawole Oluwadare, said the group approached the court to determine “whether the CBN Circular dated 6th May 2024, directing financial institutions to deduct from customers’ accounts a cybersecurity levy is unlawful and therefore ultra vires the CBN.”
In the suit number FHC/L/CS/822/2024 filed last Friday at the Federal High Court, Lagos, the plaintiffs are also asking the court to determine a number of things.
This includes “whether the CBN Circular dated 6th May 2024, directing financial institutions to deduct from customers’ accounts a cybersecurity levy and section 44(2) (a) of the Cybercrimes Act are not in breach of sections 14(2), 44(1) and 162(1) of the Nigerian Constitution 1999 [as amended], and therefore unconstitutional, null, and void.”
The CBN, relying on the Cybercrime Act 2015 [as amended] last week directed all banks mobile money operators, and payment service providers to implement a levy of 0.5% of all electronic transactions and to remit the levy to the National Cybersecurity Fund, overseen by the Office of the National Security Adviser, which is to be implemented from Monday, May 20th.
It explained that the levy is in efforts to contain the rising threat of cybercrime in the financial system.
Although some reports claim President Bola Tinubu has instructed the CBN to suspend the implementation of the controversial cybersecurity levy policy and ordered a review, but there is no official confirmation as yet from the Presidency.
Plaintiffs’ prayers
This, notwithstanding, the plaintiffs have asked the court for “a declaration that the CBN Circular dated 6th May 2024, directing all banks and other financial institutions to deduct from customers’ accounts a cybersecurity levy is contrary to the provisions of the Cybercrimes Act and ultra vires the CBN, and therefore is illegal null and void.”
The suit filed by their lawyer, Ebun-Olu Adegboruwa, a senior advocate of Nigeria (SAN), described the CBN’s notice as: “unlawful and an outright violation of the provisions of the Nigerian Constitution and the country’s international obligations.”
The parties argued that “Unless the reliefs sought are granted, the CBN will enforce its Circular directing banks to deduct from customers’ accounts a cybersecurity levy. Millions of Nigerians with active bank accounts would suffer irreparable damage from the unlawful deduction of cybersecurity levies from their accounts.
“The provisions of the Cybercrimes Act on payment of cybersecurity levy strictly apply only to businesses listed in the Second Schedule to the Act. These provisions make no reference to bank customers, contrary to the CBN Circular to all banks and other financial institutions.
“The Nigerian government has a legal responsibility to ensure the security and welfare of the people, as provided for under section 14(2)(b) of the Nigerian Constitution and human rights treaties to which Nigeria is a state party.
“The CBN Circular is also a blatant violation of Nigerians’ human rights including the right to property guaranteed under section 44 of the Nigerian Constitution and article 14 of the African Charter on Human and Peoples’ Rights to which Nigeria is a state party.
“We urge the court to grant the reliefs sought in the public interest and the interest of justice as well as to prevent arbitrariness and ensure the rule of law in the country.
“Any deduction of cybersecurity levy from Nigerians’ accounts would be contrary to the provisions of section 44(2)(a) of the Cybercrimes Act 2015 as amended by the Cybercrimes Prohibition, Prevention etc) (Amendment) Act 2024 and ultra vires the CBN, and therefore illegal, null and void.
“Section 162 (1) of the Nigerian Constitution provides that all revenues collected by or on behalf of the Government of the Federation are mandatorily required to be paid into the Federation Account save the revenue exempted by the provisions of the section.
“The National Cybersecurity Fund established by section 44(1) of the Cybercrimes Act 2015 [as amended] into which it is required to be paid the levy of 0.5% chargeable on all electronic transactions instead of the Federation Account is unconstitutional, null, and void,” the parties said.
They noted that “The CBN Circular is a breach and misinterpretation of Sections 44(2)(a) and 58 of the Cybercrimes Act [as amended], in that it purports to incorporate customers of the bank (neither defined by the Act nor designated by the CBN as financial institutions) as those to pay the cybersecurity levy.”
“As of 30 April 2024, commercial banks in Nigeria already charge exorbitant fees for electronic transactions, including Electronic Transfer Charges at N53.75 on any amount above N10,000, Stamp Duty of N50 on every transaction, and Account Maintenance Charge deducted per month,” it claimed.
Millions of Nigerians with active bank accounts would suffer irreparable damage from the unlawful deduction of cybersecurity levies from their accounts.
Backlash from stakeholders
However, the Cybersecurity Levy provoked widespread criticisms from stakeholders, including the Nigerian Labour Congress (NLC), Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), the Centre for the Promotion of Private Enterprise (CPPE), and SERAP.
Even the House of Representatives on Thursday urged the CBN to withdraw the circular even as it provides a list of transactions currently deemed eligible for exemption, to avoid multiple applications of the levy.
These are loan disbursements and repayments; salary payments; intra-account transfers within the same bank or between different banks for the same customer; and intra-bank transfers between customers of the same bank.
Others are financial institutions’ transfers to their correspondent banks; interbank placements; banks’ transfers to CBN and vice versa; inter-branch transfers within a bank; cheque clearing and settlements; letters of credit; and banks’ recapitalisation-related funding.
A statement signed by NLC President, Joe Ajaero, maintained that “These successive levies only serve to deepen the financial burden on citizens already grappling with economic challenges.”
Besides, he noted: “The directive comes on the heels of the recent implementation of stamp duty charges on mortgage-backed loans and bonds by the federal government, further straining the financial resources of Nigerians.”
As such, “The NLC calls on the federal government to reconsider these directives and prioritise policies that alleviate the financial burdens of Nigerians.”
For CPPE, its Chief Executive Officer, Muda Yusuf, expressed concern that the cybercrime levy “is a tax on electronic transactions and not on profit and has no regard to whether a business is healthy or not as even loss-making companies are liable.”
He added, “The poorer segments of society are not exempted either. This raises serious issues of equity.”
Mr. Yusuf noted that by the account of the Nigeria Interbank Settlement System (NIBSS), electronic payments on its platform in 2023 was N600 trillion and 0.5% of this translates to N3 trillion.
“It is difficult to rationalise spending this much on fighting cybercrime. Meanwhile, the total budget appropriation for defence and security in the 2024 budget was N3.2 trillion; and infrastructure appropriation was N1.32 trillion. These are just appropriations; though actual releases are often much less,” he argued.
NACCIMA on its part is worried that “This new tax could detrimentally affect Nigeria’s competitiveness in the Ease of Doing Business rankings, discourage foreign direct investment, instigate capital flight, and exacerbate the talent drain in the technology sector.”
This is because, “the introduction of this levy may be in contravention of the constitutional provision mandating all revenues to be deposited into the consolidated fund, which can only be utilised following appropriations by the National Assembly. We await further guidance on this position.”
If the levy must be implemented, the Chamber insists that “The organised private sector must be involved in the oversight and management of these funds to ensure efficiency and effective use of the levy for public and private sector services, akin to an estate service charge model. Without this, there is a risk of misapplication and lack of accountability.”
