Cyber Charge, Taxation and Minimum Wage

Sam Amadi

In the last couple of weeks, two issues have dominated discussion about Tinubu’s economy: the imposition of a cyber security charge on Nigerian bank customers by the Central Bank of Nigeria (CBN) and the demand by organized labour through the Nigeran Labour Congress (NLC) and the Trade Union Congress (TUC) for a minimum wage increase from N30,000 to N615,000. These issues are woven around the idea of taxation. A cardinal pillar of Tinubu’s economics, whatever that means, is the need to increase tax revenue. The current fiscal crisis arising from dwindling revenue, rising costs of debts and drastic devaluation of the naira mean that the government will be looking out for where to collect more money from the people. When you are a government that sees taxation as a prime fiscal policy, this disposition may become an obsession.

Of course, improving taxation is important for Nigeria’s economy and politics. It is argued that if our public expenditure is funded by taxes more than natural resources revenue, we could develop a real culture of democratic accountability as who pays the piper calls the tune. Taxation has the consequence of raising civil activism in defence of good governance. We see evidence of this in the recent outcry over the cyber security charge. So here we are debating whether bank customers should be charged 0.5% of almost every transaction they make based on a directive from the CBN to all commercial banks. According to the CBN directives, the charge is authorised by the Cyber Security (Prohibition and Prevention (amendment)) Act 2024 which instructs the banks to collect the charge from customers and pay into a National Cyber Security Fund under the management of the National Security Adviser to the President. 

The directive has triggered outcry by many Nigerians and threat of industrial action by the leadership of organized labour. Amid the furore, the House of Representatives advised the Central Bank to rescind the order. Interestingly, the House through a motion by its minority leaders, Hon. Kingsley Chinda, noted that the directive that the banks charge 0.5% of customers’ transfers contravenes Section 44(2) of the law that prescribes that only specified businesses should pay the charge, namely financial institutions, telecommunication companies, and internet service providers. By expanding the ‘tax’ to transactions by ordinary customers, the Central Bank has exceeded the powers denoted to it by the National Assembly in the Act. In lawyers’ language, the directive is ultra vires the powers of the Central Bank. After this legislative order, President Tinubu responds by directing the CBN to suspend execution of its directive.

In spite of the presidential directive to suspend the charge, we need to contextualize the directives from the Central Bank to understand what is wrong with public policy administration in Nigeria. Why did the CBN include ordinary financial transactions in the charge? Why did the federal legislature consider the imposition of a tax in the guise of a bank charge a proper response to the challenge of building a strong institutional protection against cyber attacks? Furthermore, what makes the Office of the National Security Adviser (ONSA) the best manager of a fund to develop infrastructure against cyber attacks?

The inclusion of ordinary customer transactions in the charge must be an intentional act to expand the fund. Based on annual financial transactions, inclusion of ordinary customer transactions will boost the fund with trillions of naira. This will be a classic case of easy tax collection with little administrative costs. Tax avoidance will be minimal as almost every transaction will be captured. So, in the context of obsession with fiscal buoyancy by present officials, deliberate avoidance of law in the quest for more tax revenue will not be a conspiracy theory. There must be something intentional about it. The other possible explanation could be that those who promoted the amendment thought they had reflected their intention to include every financial transaction but did not realize that the actual texts of the law remained. So, the intent was to include all financial transactions. But bad legal drafting defeated that intention. A charitable explanation is that the actual intent was to exclude ordinary financial transactions. But the CBN blundered in crafting its implementation order.

Notwithstanding whether there is a drafting error or not, the first point to note is that what government imposes by the charge is a tax, and not a bank charge. The nature of a bank charge is that it is tied to a service provided by the bank. There are numerous such charges. We may argue that they are excessive. But each of them is well-defined as a fee paid for a stated service provided by the bank. It is the bank that provides the service that takes the benefits. But the cyber security charge is not a charge in respect of services rendered by the bank. It is a tax to raise revenue for the government to build technological resilience against cyber attacks. The Act states that the fund will be managed by the ONSA subject to audit. It is hard to understand the policy thinking that gives the ONSA, an advisory office, the statutory responsibility for project management for an expansive subject matter like cyber security. From the Act, part of the fund will be used to train cyber security professionals. How is the NSA the best person to manage such human capital development?

It is evident that the federal legislators did not benefit from a rigorous social science analysis of the proposed legislation or a good cost-benefit analysis before passing the law. This raises doubt about the quality of research and analytical thinking in the Nigerian federal legislature. It is true as the United Nations Economic Commission for Africa (UNCA) in its 1985 report states that African legislatures are notoriously incapacitated in terms of knowledge and skills for effective legislation. Such incapacity is evident in the work of the Nigerian legislature. Designating the NSA as the manager of a cyber security fund show lack of analytical thinking. It does not make much sense to tax bank customers to raise money for cyber security and authorize a personal staff like the NSA to spend tax funds running into trillions without appropriation or oversight. This is an institutional failing that speaks to lack of state capacity in terms of policy management.

It is obvious that we need to institutionalize higher capacity for policy analysis in the public sector in Nigeria to enhance state capacity. One area quality policy analysis is needed is on the issue of minimum wage. The politics of minimum wage needs clarity and effective management. Since the decision by President Tinubu to remove fuel subsidy on the first day of his administration, organized Labour under the auspices of the Nigerian Labour Congress (NLC) and the Trade Union Congress (TUC) has asked for significant increase in the minimum wage. The two centres of organized Labour initially put the appropriate minimum wage at something more than N100,000. This was a far cry from the miserly N30,000. Recently, in response to the devaluation of the naira, organized Labour has increased the acceptable amount of minimum wage to above N600,000.

This demand sounds dubious to many who mock that if state governors cannot pay N30,000, how on earth can they pay N600,000. It is reasonable to doubt that any of the state governors would readily pay such amount. Not much for lack of financial resource as much as lack of goodwill and clear commitment to social and economic wellbeing of the people. We have significant democracy deficits in Nigeria both in terms of accountability and the sentiments of public good. But these deficits are rifer in the states. While the federal government could be said to have an improper understanding of development that underemphasizes human development, the states largely have no concept of development. If development occurs in the states, it is a mistake not a plan. State governments are more into acquisition and transactions based on political benefits and self promotion than development.

But let us interrogate the argument of organized Labour on why minimum wage should go up significantly. First, even before the removal of petrol subsidy and the floating of the naira, Nigeria’s minimum wage was a starvation wage. It had no bearing to reality. It was lower than those of the poorest West African countries. There was no justification to pay workers the equivalent of $50 a month then. In today’s dollar terms, it is less than $20. This minimum wage would not take workers to work and back. It means that the minimum wage worker is trapped in acute poverty, with no visible escape route.

The tragedy of starvation wage in the guise of minimum wage in Nigeria is that it is supported by a plethora of deprivations that further compounds the multidimensional poverty of the Nigerian working class. As much as income poverty does not exhaust the nature of poverty people are exposed to, it is an important element of poverty and reinforces other dimensions of poverty. As Amartya Sen and Martha Nussbaum have pointed out throughout their sterling career, development should be considered from the perspective of how people’s capabilities are expanded using market and non-market frameworks.

Development as freedom, as Sen calls it, suggests that we place the enhancement of these capabilities central to economic and social development. But for development as freedom to be a moral concept of development, it should be rooted in a sense of equality. Equality of what, as the legal scholar, Ronald Dworkin (and Amartya Sen), would ask. To an extent, it is both equality of opportunity and equality of resources. There should be a basic minimum people should not drop to except by manifest choice. Those who work have made the required choice to escape less than that minimum. That is the moral justification of a minimum wage. There is an expectation that the minimum wage can provide the worker means to procure those basic social and material goods that are needed to guarantee the worker’s basic capabilities in today’s Nigeria.

From this moral perspective, the calculation of the minimum wage should proceed in the same manner that the Nigerian Bureau of Statistics determines poverty rate through required consumption of goods and services. The NBS first determines the basket of foods and other goods required for existence outside poverty and uses the costs of such to benchmark threshold for poverty. In the same vein, we start the determination of a fair minimum wage by asking what bundle of goods and services a person needs to consume in Nigeria today to be able to exercise his or her capabilities beyond the level of extreme poverty. We then put a cost to the bundle of goods and services. We can multiple the costs with a designated number of children and dependants that is reasonable to expect from a person in that rudimentary stage of economic life. That gives us a fair sense of what the minimum wage should be.

From this thought experiment, the appropriate minimum wage will be closer to what the NLC and the TUC are asking than what the federal government is willing to offer. This is what the process for determining a minimum wage should be if we take seriously two aspects of a moral theory of development, which are, enhancing capabilities and ensuring equality. The economics and the morality align in the matter of minimum. Bad economics argues that to boost productivity we need to scale down labour protection and deprioritize workers wages and wellbeing. One of the proponents of anti-labour economics, the Nobel Laureate, Angus Deaton, has recanted. In the March 2024 special edition of the IMF’s Finance & Development on a piece titled ‘Rethinking Economics’, he admitted that eroding labour protection, especially the right to unionism, is bad economics. Of course, the recovered truth is that improving equity and enhancing earning through fair wages help boost economic growth in real terms than wage suppression and high inequality. In the light of this recovered truth, Nigeria’s path to high and sustained economic growth lies through improved productivity of its workforce, which requires good wage and protection of workers rights, rather than excessive taxation and austerity measures. 

Lastly, there is the little secret of Nigeria’s fiscal crisis. Nigeria is poor and almost broke. Oil is not flowing as it ought. Export earning is not buoyant. Debt servicing almost takes everything we earn. Yet, politicians insist they must consume as if the country is China, whereas it is more like Niger. So, what do we do? Stagnate wages in the face of rampant inflation and devaluation? No. I insist that we significantly increase minimum wage. The issue is not as much about financial poverty as much as moral poverty: the inability to have the right priority. If we can pay one trillion naira for a costal road that is not a priority and give billions to subsidize pilgrimage, which even religious texts make a private obligation, then we can pay Nigerian workers minimum wage and not starvation wage.

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