James Emejo in Abuja
The Federal Inland Revenue Service (FIRS) has directed deposit money banks to deduct and remit Electronic Money Transfer Levy (EMTL) on foreign currency (FCY) transactions going forward.
The levy is in line with the Finance Act 2020 and Stamp Act 2004, which impose an EMTL on transfer for money deposited in any financial institution on any type of account.
THISDAY learnt that in compliance with service’s directive, financial institutions have already informed their customers of the latest development.
The “Notice of Remittance of EMTL on FCY Transactions” which was sent to customers by one of the major banks, intimated them of the deduction of the sum of N50 only on every foreign currency transaction with equivalent amount of N10,000 and above going forward.
It added that the sums deducted would be remitted to the relevant tax authority.
The bank further clarified that it would deduct EMTL on qualifying transactions executed from the first week of January 2021 to the last week of December 2023 will be effected.
The EMTL levy provide additional sources of revenue for the federal government and had been deducted in other economic activities including energy.
Earlier in September, the Chairman, Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Mohammed Bello Shehu, while providing an update on remittances to the federation account, revealed that the sum of N83.02 billion accounted for revenues from the electronic money transfer levy out of which N3.32 billion was paid to FIRS as cost of collection between January and June 2023.
In August, the Central Bank of Nigeria (CBN) unveiled draft operational rules and regulations for in-country clearing and settlement of foreign currency (FCY) fund transfers among Nigerian banks.
The move seeks to enable faster, cheaper, and more transparent FCY transfers and to create an efficient and safe operation of FCY transfers amongst Nigerian banks, and improve the efficiency of the in-country FCY transfers, leading to greater confidence in the payment system.
The central bank said the settlement of clearing balances shall be accorded the highest priority for settlement under the new regime.
The CBN said the regulation provides measures that would address some of the challenges facing the current system for switching FCY transfers among Nigerian banks including high cost associated with correspondent banking services, delay and inefficiencies with processing foreign remittances for third party including IMTOs.
The bank also said the move was in exercise of the powers conferred on it under the Sections 2(d), 33 (1)(b) and 47(2) of the CBN Act 2007 to promote sound financial system in Nigeria, issue guidelines, facilitate the development of an efficient and effective payments system in Nigeria, and prescribe rules and regulations for the efficient operation of the clearing and settlement system.
The CBN, however, warned participants to adhere strictly to the bank’s policy on dollarisation, as this is mandatory for FCY transfers.
The apex bank further pointed out that the provisions of all existing guidelines, circulars and directives on the operations of domiciliary account and FCY transactions shall apply to in-country FCY switching service.
Under the regulation, if a participant does not have sufficient fund in its settlement account during the settlement of net clearing position, the CBN shall have recourse to the bank’s collateral to settle the participant’s clearing debit.
Where a participant neither has sufficient funds nor sufficient collateral the CBN shall act as lender of last resort at a fee plus penalty.
Also, each participant shall open a US Dollar account with CBN for the purpose of settlement of its In-Country FCY funds transfers, and each participant shall be responsible for ensuring that its USD account with CBN is funded, for the purpose of pre-authorised debits and settlement of net debit positions from in-country FCY clearing system among other requirements.
The guidelines read, “A member bank shall be suspended from participation, for persistent failure to settle (three times in a week) its settlement obligations from in-country FCY funds transfers. Warning shall be sent to a participant for each failure.
“Failure to provide the requisite infrastructure to enable electronic exchange of eligible payment instrument. Failure to maintain adequate collateral as prescribed by the CBN, from time to time.
“When the bank is suspended by the Management of the CBN in the interest of the system for any other reason not aforementioned. Every suspension shall last until such a time reinstatement is approved by the CBN.”
Essentially, parties to FCY funds transfer, clearing and settlement in Nigeria shall include but not limited to the CBN, Nigeria Inter-Bank Settlement System PLC (NIBSS), Authorized Dealer Banks, International Money Transfer Operators (IMTOs), Customers of ADBs and any other institution as may be approved by CBN.
