- Fintechs have announced that the N50 levy will apply to all transactions above N10,000 from September 9
- The Electronic Money Transfer levy is part of the regulations of the Finance Act of 2020
- With the increased growth of digital transactions, the levy raises concerns about the distinct proposition of fintechs
Financial technologies (fintechs) in Nigeria have announced the deduction of N50 transfer levy on transactions above N10,000 on customers' personal or business accounts beginning Monday, September 9.
In a message to customers on Saturday, September 7, titled, ‘FGN Electronic Money Transfer levy,’ OPay, one of the leading fintechs in the country, said the levy complies with the regulations of the Federal Inland Revenue Service (FIRS).
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.”
Like OPay, like Moniepoint
In a terse notice to its customers, Moniepoint also announced the introduction of the levy, saying,
“A N50 fee would be charged on inflows you receive of N10,000 and above from Monday, September 9, 2024. Your BRM is available to answer questions you might have.”
Levy was introduced by the Finance Act of 2020
The Federal Government, in its efforts to bolster revenue, introduced the Electronic Money Transfer Levy Regulations, 2022, under the authority of Zainab Ahmed as Minister of Finance, Budget and National Planning, under Section 89A(3) of the Stamp Duties Act Cap. S8 Laws of the Federation of Nigeria, 2004 (SDA), as amended by the Finance Act, 2021.
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.
According to the regulations, the levy for transfers in other currencies will be charged at exchange rates determined by the Central Bank of Nigeria.
The regulation also appointed the FIRS as the administrator of the levy and is responsible for assessing, collecting and accounting for the levy.
Among others, the regulations require receiving banks to collect and remit the levy to the FIRS by the next working day or on a date prescribed by the FIRS, while the levy for walk-in customers without accounts must be deducted from the amount payable.
Any bank(s) that fails to collect the levy will be penalised and pay 150 per cent of the levy not collected. The regulations also stated that if a bank collects the levy but fails to remit it, such a bank will be liable for the levy, plus a 50 per cent penalty and interest at the CBN’s Monetary Policy Rate (MPR).
A bank that fails to render or inaccurately renders returns will be liable for a penalty of 10 per cent of the unrendered or incorrectly rendered returns.
Tapping into the digital payment goldmine
In recent years, there has been an uptick in the adoption of electronic payment, mostly spurred by Nigeria’s young demographic, innovation of fintechs and the CBN’s policies on financial inclusion.
The growth has also reflected in the volume and value of transactions carried out through electronic payment channels. According to the Nigeria Inter-Bank Settlement System (NIBSS), 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.
There are indications that the volume and value of electronic transactions will increase further in 2024, given that the first quarter (Q1) of the year has seen a transaction value of N234 trillion, which is 89 per cent higher than the N123.9 trillion recorded in Q1 2023.
In analysing the payment landscape in Nigeria, analysts at Stears say electronic transfers, covering the NIBSS Instant Payment (NIP) transactions enabled through web, mobile, USSD, etc., have an 88.20 per cent market share. This is followed by mobile agents with 6.89 per cent of the market share, Automated Teller Machine (ATM) with 3.36 per cent and Point of Sale (PoS) with 1.55 per cent of the market share.
With an expected increase in electronic transactions and the CBN’s efforts to curb excess liquidity, the government expects revenue from EMTL, which is shared among the three tiers of government. Already, the Federal Government aims to make N483.73 billion in three years from electronic payments through the EMTL.
The Budget Office noted that the expected revenue in the three years is N137.03 billion in 2023, N157.59 billion in 2024 and N189.11 billion in 2025. In 2023, the Federal Government made N180.31 billion from EMTL, which represents N43.96 million or 29.45 per cent higher than its target for the year.
Will levy threaten fintechs’ unique selling point?
With millions of customers in Nigeria in just a few years of operation, fintechs have redefined electronic banking with innovations like lightning speed, mobile, real-time, boundless transactions and cheaper or fewer charges.
Fintechs, such as Flutterwave, OPay, PalmPay, Moniepoint, Kuda, etc., have become widely accepted for these innovative approaches to banking, further widening their contribution to the growth of digital payments in Nigeria.
Their popularity 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.
With fintechs such as OPay already charging customers N10 after their third transfer to other banks in a day, it is hoped that the new directive doesn’t threaten their ‘no-charges-apply’ unique selling point.
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, many wondered if cash was still king.
