Emmanuel OchayiWhat is the Transfer Levy?
Starting September 9, 2024, fintech companies in Nigeria such as OPay, Moniepoint, and others will begin deducting the N50 Electronic Money Transfer Levy (EMTL) from customer inflows of N10,000 and above. This new policy follows a directive from the Federal Inland Revenue Service (FIRS) and marks a shift for fintech users who have previously enjoyed free banking services.
The levy, which was previously exclusive to commercial banks, will now apply to all fintech firms, prompting questions about its potential impact on the Nigerian economy, its customers, and the fintech sector. A major point of contention is whether the levy constitutes double taxation, considering other financial charges like VAT, company income tax, and electronic transfer fees.
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Nigeria’s fintech industry has seen tremendous growth, with more than 250 companies, including major players like OPay, Moniepoint, and Palmpay, processing millions of transactions daily. Fintechs offer fast, efficient, and often lower-cost alternatives to traditional banking systems. However, with the introduction of the EMTL, the dynamics of how these firms operate will change. According to fintech notifications sent to customers, the N50 levy will be deducted from transfers of N10,000 and above.
Moniepoint notified customers:
“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.”
Similarly, OPay emphasised that the levy is a federal directive, stating:
“Please be informed that starting September 9th, 2024, a one-time fee of N50 will be applied to electronic transfers of N10,000 and above paid into your personal or business account in compliance with the Federal Inland Revenue Service (FIRS) regulations. It is important to note that OPay does not benefit from this charge in any way as it is directed entirely to the Federal Government.”
Analyzing the Data: How Much Will the Government Make from the Transfer Levy?
With 250 fintech companies operating in Nigeria, the volume of electronic transfers is substantial. Assuming each fintech processes an average of 100,000 transfers of N10,000 and above daily, the total number of transfers subject to the N50 EMTL would be approximately 25 million transactions per day. This would mean that:
• Daily government revenue from EMTL:
25,000,000 transfers × N50 levy = N1.25 billion
• Monthly government revenue from EMTL:
N1.25 billion × 30 days = N37.5 billion
• Annual government revenue from EMTL:
N37.5 billion × 12 months = N450 billion
• This substantial revenue is shared among the three tiers of government: the federal government (15%), state governments (50%), and local governments (35%). This breakdown would allocate approximately:
• N67.5 billion to the federal government annually,
• N225 billion to state governments,
• N157.5 billion to local governments.
This influx of revenue is a significant source of funds for the Nigerian government, particularly as the nation seeks to diversify income streams beyond oil.
Does the Transfer Levy Amount to Double Taxation?
Many Nigerians are questioning whether the introduction of the EMTL is a case of double taxation. In addition to the N50 levy, businesses and individuals are already subject to other taxes such as Value Added Tax (VAT), company income tax, and other electronic transfer fees. Critics argue that these additional levies could lead to over-taxation, making it difficult for small businesses and low-income earners to thrive.
READ ALSO: Opay To Charge N50 Levy On Transfers Of N10,000, Above From September 9
According to financial analyst Segun Oluwole, “The EMTL, when combined with existing taxes, creates a significant burden on consumers and businesses. While the government needs to generate revenue, there should be a balance to avoid stifling the economy.”
For instance, if a small business makes multiple transfers exceeding N10,000 in a day, they will be charged N50 per transfer, on top of VAT, company income tax, and other fees. This raises concerns about the cumulative effect of these charges on businesses that rely heavily on electronic transactions.
What Are the Implications for the Fintech Sector?
The extension of the transfer levy to fintech companies could potentially impact the way they operate. Previously, fintechs offered free or low-cost banking alternatives, attracting millions of users who preferred these services over traditional banks. Now that the EMTL will apply to fintech transactions, there may be a shift in user behavior, particularly for individuals and businesses that engage in frequent transfers.
Some fintech users have already expressed their concerns. One user stated, “The N50 levy might seem small, but it adds up, especially if you make several transfers daily. It feels like we’re being taxed from all angles.”
Moreover, fintech companies themselves may face challenges in maintaining customer satisfaction as they comply with government directives. According to fintech executive Chinedu Eze, “We are committed to following government regulations, but we also understand our customers’ concerns. We will continue to innovate and find ways to provide value while complying with the law.”
The Future of Transfers in Nigeria
The introduction of the N50 Electronic Money Transfer Levy (EMTL) represents a significant change in how fintechs and their customers interact with financial services. While the levy will generate substantial revenue for the Nigerian government, it raises concerns about double taxation and the financial burden on businesses and individuals.
As fintech companies continue to navigate these changes, it will be important for the government to balance its revenue-generation goals with the need to support the growth of Nigeria’s digital economy. Whether the EMTL will hinder or help the fintech industry in the long run remains to be seen, but for now, it is clear that the cost of transferring money in Nigeria has become more expensive.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
