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The Federal Inland Revenue Service (FIRS) has issued a directive to deposit money banks, instructing them to deduct and remit the Electronic Money Transfer Levy (EMTL) on foreign currency (FCY) transactions in accordance with the Finance Act 2020 and Stamp Act 2004.
The EMTL levy is applicable to transfers of money deposited in any financial institution across various account types. Financial institutions have already communicated this directive to their customers, informing them of the new development.
According to information from one major bank, customers will experience a deduction of N50 for every foreign currency transaction equal to or exceeding N10,000. The deducted amounts will be remitted to the relevant tax authority. The bank clarified that EMTL deductions on qualifying transactions executed from the first week of January 2021 to the last week of December 2023 will take effect.
The introduction of the EMTL levy serves as an additional revenue source for the federal government, and it has previously been applied to various economic activities, including the energy sector.
In September, the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Mohammed Bello Shehu, reported that N83.02 billion in revenues from the electronic money transfer levy had been recorded between January and June 2023. Out of this sum, N3.32 billion was paid to the FIRS as the cost of collection.
The Central Bank of Nigeria (CBN) had earlier introduced draft operational rules and regulations for in-country clearing and settlement of foreign currency fund transfers among Nigerian banks. This initiative aims to enhance the speed, cost-effectiveness, and transparency of foreign currency transfers within the country. The regulation prioritizes the settlement of clearing balances under the new regime.
The CBN emphasized adherence to the bank’s policy on dollarization, mandatory for foreign currency transfers, and highlighted that existing guidelines, circulars, and directives on domiciliary accounts and foreign currency transactions would apply to the in-country foreign currency switching service.
The regulation outlines measures for addressing challenges in the current system, including high costs associated with correspondent banking services and delays in processing foreign remittances. Participants failing to settle obligations may face suspension, with the CBN acting as the lender of last resort in certain situations.
The parties involved in foreign currency funds transfer, clearing, and settlement in Nigeria include the CBN, Nigeria Inter-Bank Settlement System PLC (NIBSS), Authorized Dealer Banks, International Money Transfer Operators (IMTOs), and customers of ADBs, among others, subject to CBN approval.
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