As of September 9, 2024, Nigerian customers will face a mandatory ₦50 charge on electronic transfers exceeding ₦10,000. This fee, enforced by fintech companies across the country, is a result of the Federal Inland Revenue Service’s (FIRS) directive to implement the electronic money transfer levy, sparking widespread discontent among Nigerians.
The ₦50 levy, imposed on both personal and business transfers, was introduced under the Electronic Money Transfer Levy Regulations of 2022, a legislative offshoot of Nigeria’s Finance Act, 2020. The law requires recipients of electronic transfers equaling or surpassing ₦10,000 to pay this charge, which also applies to foreign currency transactions, calculated according to Central Bank of Nigeria (CBN) exchange rates.
While the levy was first introduced in 2022, its widespread enforcement through fintech platforms like OPay, Moniepoint, and PalmPay has now caught the attention of the public. The FIRS, tasked with collecting and managing the levy, reported that it raised ₦125 billion from such charges in 2022 alone. However, many Nigerians remain unclear on how these funds are used and have voiced concerns about its fairness and necessity.
Economists are cautioning that the new levy, while aimed at boosting government revenue, could have unintended consequences on digital financial services. Marcel Okeke, a former Chief Economist at Zenith Bank, criticized the timing of the levy, pointing out that it could undermine the significant strides made by the fintech industry in fostering financial inclusion in Nigeria.
“While the government is understandably focused on increasing revenue, imposing a levy on digital transactions may discourage people from using fintech services. This could potentially slow the adoption of digital payments and negatively impact the broader economy,” Okeke said.
He highlighted that the fintech sector has played a crucial role in expanding access to financial services, especially for the unbanked population. A levy like this, even if small, could change consumer behavior, leading them to seek alternatives with lower or no transaction fees, and reducing the volume of digital payments.
The ₦50 levy could also disproportionately affect small businesses and individuals who rely heavily on fintech platforms for daily financial transactions. Small and medium-sized enterprises (SMEs), which contribute significantly to Nigeria’s economy, may face increased costs for digital payments, potentially affecting their operations. Similarly, everyday consumers may feel the financial pinch, as even small fees can add up over time, particularly for those making frequent transactions.
Nigeria’s fintech companies have been at the forefront of providing innovative solutions to these businesses and consumers, offering accessible and affordable digital financial services. Fintechs have revolutionized how Nigerians manage their money, from mobile wallets to online lending platforms. However, the introduction of the levy could erode these gains, making fintech services less attractive compared to traditional banking options.
Beyond the levy, economists are urging the government to address other challenges facing the fintech sector, such as regulatory gaps and cybersecurity threats. With fintech companies increasingly becoming targets for cyberattacks and the presence of unregulated “loan sharks” exploiting vulnerable consumers, the need for robust regulation is pressing.
“The government should be more focused on strengthening regulatory frameworks for fintech companies and protecting consumers from fraud, rather than imposing new taxes,” Aliyu noted. He emphasized that addressing these vulnerabilities would be more beneficial to the long-term growth of Nigeria’s digital economy.
The levy has already drawn sharp criticism from consumer advocacy groups and student organizations. The National Association of Nigerian Students (NANS), for example, has expressed concern over the impact of the ₦50 charge on students who rely on fintech platforms for educational and personal expenses. In a statement, the association called on the government to reverse the levy, citing the already difficult economic conditions faced by many Nigerians.
“Over 40 million Nigerian students use fintech services to manage their finances. The new levy could reduce the funds they have available for essential expenses like school fees, textbooks, and daily living costs,” the statement read.
The broader public has also taken to social media to voice opposition to the levy, with many Nigerians accusing the government of imposing excessive taxes without improving public services. Critics argue that the levy will only add to the financial burdens faced by ordinary citizens at a time of rising living costs.
In response to the public backlash, fintech companies have been quick to clarify that the ₦50 levy is a government-imposed charge and not a profit-making measure. OPay and Moniepoint have both communicated that the funds from the levy are directed to the Federal Government through the FIRS and that their services remain committed to financial inclusion.
“We want to remind our customers that the ₦50 transfer levy is directed to the Federal Government via the FIRS. Fintech companies do not benefit from this charge in any way,” OPay said in a statement.
While the fintech sector has been instrumental in fostering cashless transactions and supporting Nigeria’s economic transition, the imposition of the EMTL may pose a significant hurdle to continued growth. The fintech industry and its users await further government actions to either mitigate the impact or find alternative methods to generate revenue without compromising digital financial inclusion.