- The implementation of the N50 electronic transfer levy doesn’t sit well with Nigerians
- Economists say the policy has implications for the economy and fintechs
- PoS operators say policy affecting their profit margin and a hint of a possible review of their charges
On Saturday, September 7, financial technologies (fintechs) in Nigeria announced that a deduction of N50 transfer levy on transactions above N10,000 on customers’ personal or business accounts will apply beginning Monday, September 9.
A notice sent to customers of Opay, one of the leading fintechs in the country, titled, ‘FGN Electronic Money Transfer levy,’ said the levy complies with the Federal Inland Revenue Service (FIRS) regulations.
The fintech added that the levy is entirely directed to the Federal Government and not a revenue source.
The notice read, “Dear valued customers, please be informed that starting September 9, 2024, a one-time fee of N50 will be applied for electronic transfers of N10,000 and above, paid into your personal or business account in compliance with the Federal Inland Revenue Service regulations.
“It is important to note that OPay does not benefit from these charges in any way, as it is directed entirely to the Federal Government.”
The transfer levy was part of the 2020 amendments made under Section 89A(3) of the Stamp Duties Act Cap. S8 Laws of the Federation of Nigeria, 2004 (SDA) and introduced by the Finance Act of 2021 and aims to bolster government revenue given that electronic payment transactions increased by 55 per cent in 2023 to N600 trillion from N387 trillion in 2022, setting an all-time high since the introduction and adoption of electronic payment in the country, according to the Nigeria Inter-Bank Settlement System (NIBSS).
The EMTL regulations guide imposition, administration, collection and remittance of the levy, with a key provision including a one-time levy of N50 on the recipient of any electronic receipts or transfers of N10,000 or more.
News of electronic transfer levy doesn’t sit well with Nigerians
The news of the implementation of the transfer levy has generated ripples among Nigerians who condemn its implementation, citing the impact on the economy and as an added burden on the shoulders of the masses.
Citing the financial strain the levy will cause students, the Senate Clerk of the National Association of Nigerian Students (NANS) National Headquarters, Oladimeji Uthman, said the policy will exacerbate the financial burden on students.
In a statement on Sunday, September 8, NANS called on the FIRS and the Federal Government to reverse the policy and urged the government to explore long-term revenue strategies rather than immediate taxation of already burdened citizens.
It said the policy impacts over 40.1 million Nigerian students who use these fintech services and will reduce the funds available for essential needs such as school fees, textbooks and living expenses.
NANS said, “This sentiment reflects a broader discontent among students who believe that government revenue strategies should focus on long-term development rather than immediate taxation.
“The proposed N50 Electronic Money Transfer Levy (EMTL) impacts over 40.1 million Nigerian students who use these fintech services. Many students rely on financial transfers for their education and daily expenses, and the new levy could significantly reduce the funds available for essential needs such as school fees, textbooks and living expenses.”
Policy will further strain economy, ground fintechs – Economists
Economists maintain that the policy will hurt the economy and ground fintechs in the long run. They argue that the government should instead focus on regulation, especially in the face of ongoing cybersecurity threats and loan sharks.
Given that fintechs have redefined electronic banking with innovations like lightning speed, mobile, real-time, boundless transactions and cheaper or fewer charges in just a few years of operation, the news may pose a threat to the ‘no-charges-apply’ unique selling point of fintechs.
Already, Opay charges customers N10 after their third transfer to other banks in a day unlike what obtains with traditional banks where every electronic transfer attracts charges.
The popularity of fintechs like Flutterwave, Opay, PalmPay, Moniepoint, Kuda, etc., may have been tested, approved and trusted in early 2023 during the now botched naira redesign and cashless policy of the CBN, leading to a significant cash crunch in the country. The fintechs demonstrated resilience during the period, ensuring transaction settlements that exposed vulnerabilities in many traditional banking platforms.
Former Chief Economist at Zenith Bank, Marcel Okeke, told The PUNCH said the move may have unintended consequences, potentially harming the economy and stifling innovation in the fintech sector.
He said, “The Federal Government’s move to impose a N50 levy on fintech transactions is driven by a desire to boost revenue. However, this approach may have unforeseen consequences.
“By targeting digital transactions, the government may inadvertently discourage people from using these services, leading to a demonetisation of the economy.”
Another economist, Alias Aliyu, said the government’s “desperate move” to increase revenue is unjustifiable given the current economic conditions, pointing out that the government already generates significant revenue from various sources, including the floating of the naira, fuel subsidy removal and customs tariffs.
He said, “The government needs to address these challenges through effective regulation, rather than imposing additional fees on consumers. This is the wrong time for such a move and it will only exacerbate the already difficult economic situation for many Nigerians.”
PoS operators: Levy has affected our profit margin
Point of Sale (PoS) operators, who mainly use fintech platforms for their operations, are also not in support of the policy, seeing how it has affected their profit margin.
It has also stirred up a possibility of a review of the operators' charges, who charge N100 on transactions less than N5,000 and N200 on N10,000 before the electronic transfer levy was announced by fintechs.
With a 1.55 per cent market share of the electronic payment landscape in Nigeria, there is no gainsaying the place of the PoS business in driving financial inclusion, creating employment opportunities and providing financial services in underserved communities.
Since its introduction in 2013, the adoption of PoS as a payment option has not weaned. According to the NIBSS, the value of PoS transactions rose by 27.85 per cent from N8.39 trillion in 2022 to N10.73 trillion in 2023.
In January 2023, transactions via PoS stood at N807.16 billion but increased through the months to reach N862 billion in December 2023.
With growth of digital payment in Nigeria, is cash still king?
Meanwhile, TheRadar reported that the value of digital transactions increased 47.4 times between 2013 and 2023 to reach N657.8 trillion from N13.9 trillion, representing an average monthly figure of N54 trillion over the 10 years.
With the growth in digital transactions, driven by Nigeria’s young demographic, fintech innovations and the policies of the Central Bank of Nigeria, one wonders if cash is still king.
