Moniepoint, OPay, Others to Start Deducting N50 EMTL from September 9, 2024

On September 9, 2024, financial service providers such as Moniepoint, OPay, and other fintech companies operating in Nigeria are scheduled to begin the deduction of a ₦50 Electronic Money Transfer Levy (EMTL) on electronic transactions. This announcement has stirred up discussions among users of these services and the broader Nigerian population. This development follows government directives that aim to regulate and tax digital financial services more effectively, while also seeking to generate additional revenue for the state. In this article, we’ll take a comprehensive look at what the EMTL is, why it’s being implemented, who it affects, and the broader implications for Nigerians, fintech companies, and the economy at large.

What Is the Electronic Money Transfer Levy (EMTL)?

The Electronic Money Transfer Levy, abbreviated as EMTL, is a government-imposed fee on electronic transactions conducted via financial service platforms. It was first introduced by the Nigerian government as part of its Finance Act 2020, which sought to expand the country’s tax net and ensure that digital financial transactions contributed to government revenue. The EMTL primarily targets digital transfers, and with the rapid rise in cashless transactions, it’s seen as a mechanism to tap into the burgeoning fintech sector, ensuring that the government benefits from the increasing number of transactions processed online.

The Finance Act stipulated that for every electronic money transfer of ₦10,000 and above, a flat fee of ₦50 will be charged to the user. Initially, this was more commonly implemented by traditional banks; however, starting September 9, 2024, this fee will be extended to fintech companies like Moniepoint, OPay, and others, marking a significant shift in the way electronic transactions are handled by non-bank financial institutions.

Why Is the EMTL Being Introduced to Fintech Platforms?

One of the primary reasons for the introduction of EMTL to fintech platforms is the rapid expansion of the digital financial services ecosystem in Nigeria. Fintech companies like Moniepoint and OPay have grown exponentially, enabling millions of Nigerians to access financial services that were previously out of reach, especially in rural and underserved areas. These platforms have helped drive Nigeria’s cashless policy by offering convenient, fast, and affordable transaction services to users. However, with this growth comes the challenge of regulation and taxation, as the government seeks to ensure that fintech companies also contribute to the public coffers in line with the traditional banking sector.

Fintechs have been somewhat under the radar in terms of taxation, largely because they operated in a relatively unregulated space compared to traditional financial institutions. With this extension of the EMTL, the government aims to create a level playing field between banks and fintech companies while simultaneously broadening its tax base. The government estimates that applying EMTL to digital platforms could generate billions of naira in revenue annually, which will be channeled into public services, infrastructure, and other national projects.

How Will the N50 EMTL Deduction Work?

From September 9, 2024, users of Moniepoint, OPay, and similar digital financial platforms will experience an automatic deduction of ₦50 on transactions of ₦10,000 and above. This fee will be deducted at the point of transaction, and users will be notified in their transaction receipts. The levy applies only to electronic transfers and does not include payments made using physical cash.

For example, if a user initiates a money transfer of ₦20,000 using OPay, a ₦50 fee will be deducted immediately, and the total cost of the transaction will become ₦20,050. Similarly, if a customer sends ₦30,000 using Moniepoint, the same ₦50 deduction will occur, irrespective of the transfer amount. This flat rate makes the EMTL predictable, but users who make frequent transfers might feel its impact more acutely over time.

Who Will Be Affected by the EMTL?

The EMTL will affect a wide range of users, including individuals and businesses that rely heavily on digital financial services for their daily transactions. As fintech platforms have become popular in both urban and rural areas, a broad cross-section of society will be impacted. Here’s a breakdown of how various groups might feel the effects:

• Individual Users: For individuals who regularly send money to family, friends, or business associates, the introduction of the ₦50 levy may initially seem insignificant. However, over time, frequent transactions could result in noticeable cumulative deductions. Users who make several transfers each day or week may find themselves paying hundreds of naira in EMTL deductions monthly. For low-income users, this could add to the cost of using fintech services.
• Small Businesses: Many small business owners use fintech platforms like OPay and Moniepoint for their day-to-day financial transactions due to the convenience and lower fees compared to traditional banking. The introduction of the EMTL may lead to a slight increase in operating costs for these businesses, especially those that make multiple payments or process numerous customer orders daily. However, the flat ₦50 fee may still be considered manageable compared to the charges imposed by traditional banks.
• High-Volume Users: High-volume users such as e-commerce businesses, freelancers, and contractors who regularly transfer large sums could face a more significant financial impact from the EMTL. These users typically process numerous transactions in a single day, and while the ₦50 charge may seem negligible for a single transaction, it can accumulate to a larger sum when applied to multiple transfers. Such businesses may need to factor in this additional cost when planning their transaction processes.

Fintech Companies: How Will They Handle the EMTL?

Fintech companies like Moniepoint, OPay, and others have made their mark by offering low-fee or no-fee transaction services. This has been one of the key reasons for their widespread adoption, particularly among users looking for affordable alternatives to traditional banking. With the introduction of the EMTL, these fintech companies are faced with the challenge of balancing user satisfaction with compliance to government directives.

The fintech sector operates on the premise of efficiency, convenience, and low cost. The introduction of a flat-rate deduction, such as the EMTL, risks eroding some of the competitive advantages fintech companies hold over traditional banks. In response, some fintech companies may attempt to absorb part of the cost of the EMTL in order to maintain customer loyalty, while others may be forced to pass on the full cost to users. Ultimately, each fintech platform will need to communicate clearly with their customers, ensuring transparency about the new charges and how they will be applied.

Additionally, fintech companies may need to adjust their service offerings, possibly introducing new pricing models that either bundle the EMTL into overall fees or provide options for users to minimize the cost impact through subscription services or loyalty programs.

Potential Economic and Social Implications of the EMTL

The introduction of the EMTL across fintech platforms raises several questions about the broader economic and social implications of the levy. On one hand, it represents a positive step toward regulating the fintech space and ensuring that the digital financial sector contributes to national revenue. However, there are concerns that this could lead to unintended consequences for low-income users and small businesses that rely heavily on digital platforms for financial inclusion.

One potential outcome of the EMTL is that it could slow the adoption of digital financial services, particularly among users who are already skeptical of formal financial institutions. Many Nigerians have embraced fintech platforms because they offer a more affordable and accessible alternative to banks. The introduction of a levy, even as small as ₦50, might push some users to revert to cash-based transactions, which could run counter to the government’s cashless policy objectives.

Moreover, the EMTL could increase the cost of doing business for small and medium-sized enterprises (SMEs) that rely on fintech services for their transactions. This might lead to price hikes for goods and services as businesses seek to offset the additional costs incurred from frequent electronic transfers. Ultimately, while the levy might generate additional revenue for the government, it could also affect the spending power of consumers and the operational efficiency of businesses.

Conclusion: Navigating the EMTL as a User or Business

As September 9, 2024, approaches, it’s clear that the introduction of the ₦50 EMTL by Moniepoint, OPay, and other fintech platforms will have a noticeable impact on how Nigerians conduct their digital transactions. For users, understanding how the levy works and factoring it into their financial planning is essential. Small businesses, in particular, will need to assess how the EMTL affects their bottom line and consider adjusting their payment processing strategies accordingly.

For fintech companies, the challenge lies in maintaining their competitive edge while complying with government regulations. The introduction of the EMTL may test the loyalty of customers who have come to rely on low-fee services, but with the right communication and strategic adjustments, these companies can continue to thrive in the digital financial landscape.

Ultimately, while the EMTL represents a shift in the way electronic money transfers are taxed in Nigeria, it also highlights the evolving nature of the fintech space and the need for regulatory frameworks that can keep pace with innovation. As more Nigerians embrace digital financial services, ensuring that these platforms remain affordable, accessible, and transparent will be crucial to their long-term success.