The recent decision by the Federal Government to implement a N50 Electronic Money Transfer Levy on customer transactions has drawn criticism from economists, who caution that this initiative could deter digital transactions and negatively impact the economy.

This levy, which is expected to be enforced shortly, will be applicable to all inflows of N10,000 and above received by customers of fintech firms such as OPay and Moniepoint.

Marcel Okeke, the former Chief Economist at Zenith Bank, expressed that this decision is poorly timed and could have significant adverse effects on the economy, especially within the rapidly expanding fintech sector.

He contended that while the government aims to enhance revenue through this levy, it may lead to unintended repercussions that could stifle economic growth and innovation in fintech.

“The Federal Government’s decision to impose a N50 charge on fintech transactions stems from a need to increase revenue. However, this strategy may yield unexpected outcomes,” Okeke stated.

He pointed out that by targeting digital transactions, the government risks discouraging users from these services, potentially leading to a reduction in monetary circulation within the economy.

He also highlighted that even a minor fee could greatly influence consumer behavior, prompting individuals to switch to alternative platforms that offer lower or no fees.

Fintech companies play a crucial role in promoting digital transaction adoption in Nigeria by delivering innovative solutions that improve accessibility and convenience for users.

This sector is particularly dedicated to meeting the needs of the unbanked population, with approximately half of Nigeria’s adult population still lacking adequate access to traditional banking services.

In a conversation with The PUNCH, economist Alias Aliyu characterized the government’s initiative as a “desperate move” to boost revenue, asserting that the prevailing economic conditions do not warrant such a measure.

He noted that the government is already generating substantial revenue from multiple avenues, such as the floating of the naira, the removal of fuel subsidies, customs tariffs, and the recently implemented 10 percent VAT increase, which has faced considerable criticism.

Additionally, Aliyu stressed the importance of prioritizing regulation over fee increases, especially given the persistent threats posed by cybersecurity issues.

He pointed out that Fintech companies are particularly vulnerable to cyberattacks and highlighted other pressing concerns, such as predatory lending practices, that necessitate robust regulatory measures.

"The government must tackle these issues through effective regulation instead of imposing extra fees on consumers. This is not the appropriate time for such actions, as it will only worsen the already challenging economic conditions for many Nigerians," he stated.

In 2023, the Federal Government achieved N180.31bn in EMTL revenue, exceeding its target of N136.35bn by 29.45 percent. This revenue is allocated among federal, state, and local governments.

The remarkable increase in EMTL revenue is expected to persist, fueled by the growing acceptance of cashless transactions in Nigeria. The Central Bank of Nigeria has forecasted a reduction in cash usage by 2025, further enhancing digital payment methods.

Notably, cashless transactions surged to over N600tn by the end of 2023, rising from N395.38tn in 2022. This upward trajectory continued into 2024, with transactions increasing by 88.09 percent to N237tn in the first quarter.

Meanwhile, Oladimeji Uthman, the Senate Clerk of the National Association of Nigerian Students, National Headquarters, urged economic managers to reconsider the newly implemented electronic money charges imposed by Fintechs.

In a statement released on Sunday, he expressed strong disapproval of the new policy, which requires a N50 deduction for every electronic transfer of N10,000 and above through fintech companies.

The policy scheduled to be implemented on September 9, 2024, is perceived as increasing the financial strain on Nigerian students and the wider community.

According to the Senate clerk, the new levy, which was previously limited to commercial banks, will now also apply to fintech platforms like OPay and Moniepoint, effectively ending the period of complimentary banking services that many of these providers have offered.

He noted, "The levy directed to the Federal Government through the FIRS does not provide any benefits to the fintech companies themselves."

Uthman called on the Federal Government to consider alternative revenue streams, such as investments in agriculture, quality education, infrastructure, and job creation, instead of imposing further financial pressures on students and the general populace.

"This perspective echoes a growing dissatisfaction among students who feel that government revenue strategies should prioritize sustainable development over immediate taxation."

The proposed N50 Electronic Money Transfer Levy (EMTL) will affect more than 40.1 million Nigerian students who utilize these fintech services.

Many students depend on financial transfers for their educational and daily needs, and this new levy could considerably diminish the funds available for critical expenses like tuition, textbooks, and living costs, as stated.