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The Federal Government’s recent move to deduct a N50 Electronic Money Transfer Levy from customers’ transactions has sparked criticism from economists, who warn that the move may discourage digital transactions and harm the economy.
The levy, which is set to take effect soon, will apply to every inflow of N10,000 and above received by customers of fintech companies, including OPay and Moniepoint.
Former Chief Economist at Zenith Bank, Marcel Okeke, told The PUNCH that the move was ill-timed and could have far-reaching negative consequences for the economy, particularly in the fintech sector, which has been growing rapidly in recent years.
Okeke argued that the government’s desire to boost revenue through this measure may have unintended consequences, potentially harming the economy and stifling innovation in the fintech sector.
“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,” Okeke said.
He further emphasised that even a small fee can significantly impact behavior, as people may choose to move their accounts to alternative platforms with lower or no fees.
Fintech companies are significantly influencing the adoption of digital transactions in Nigeria by providing innovative solutions that enhance accessibility and convenience for users.
The sector is particularly focused on addressing the needs of the unbanked population, with around half of Nigeria’s adults still underserved by traditional banking systems.
Speaking with The PUNCH, another economist, Alias Aliyu, described the government’s action as a “desperate move” to increase revenue, arguing that the current economic conditions do not justify such a measure.
He pointed out that the government already generates significant revenue from various sources, including the floating of the naira, fuel subsidy removal, customs tariffs, and the recent 10 per cent VAT increase, which has been widely criticised.
Furthermore, Aliyu emphasised the need for the government to focus on regulation rather than increasing fees, particularly in the face of ongoing cybersecurity threats.
He highlighted the susceptibility of Fintech companies to cyberattacks and the presence of other issues, such as loan sharks, that require strong regulatory action.
“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,” he said.
In 2023, the Federal Government generated N180.31bn EMTL, surpassing its target of N136.35bn by 29.45 per cent.
The EMTL revenue is distributed among the federal, state, and local governments. The significant growth in EMTL revenue is anticipated to continue, driven by the increasing adoption of cashless transactions in Nigeria.
The Central Bank of Nigeria predicted a decline in cash usage by 2025, further boosting digital payment channels.
Notably, cashless transactions skyrocketed to over N600tn by the end of 2023, up from N395.38tn in 2022. This upward trend persisted in 2024, with transactions soaring by 88.09 per cent to N237tn in the first quarter.”
Meanwhile, the Senate Clerk of the National Association of Nigerian Students, National Headquarters, Oladimeji Uthman, called on economic managers to reverse the newly introduced electronic money charged by Fintechs
In a statement signed by Uthman on Sunday, he voiced strong opposition to the new policy, which mandates a N50 deduction on every electronic transfer of N10,000 and above through fintech companies.
However, the policy set to take effect on September 9, 2024, is seen as exacerbating the financial burdens on Nigerian students and the general populace.
The Senate clerk said the new levy, previously applicable only to commercial banks, now extends to fintech platforms such as OPay and Moniepoint, ending the era of free banking services that many of these companies offered.
“The levy directed to the Federal Government via the FIRS does not benefit the fintech companies themselves,” he stated.
Uthman urged the Federal Government to explore alternative revenue sources, such as investing in agriculture, quality education, infrastructure development, and job creation, rather than imposing additional financial burdens on students and ordinary citizens.
“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,” the statement read.
