The Federal Government plans to collect over N425 billion from seven Nigerian banks through a one-time windfall tax on their foreign currency revaluation gains for the 2023 financial year. This move follows the Senate’s approval of President Bola Tinubu’s request to amend the Finance Act, imposing the tax on banks’ foreign exchange profits in 2023.
A windfall tax is a levy on companies that have benefited significantly from favorable market conditions. According to annual reports filed with the Nigerian Exchange Limited, the seven banks involved—Guaranty Trust Holding Company, United Bank for Africa, Access Holdings, FCMB Group, FBNHoldings, Zenith Bank, and Fidelity Bank Plc—reported a combined N851 billion in foreign currency gains for the review year.
Key highlights include GTCO’s forex revaluation gain of N441.79 billion, a 662% increase from 2022. UBA reported a gain of N26.58 billion, while Access Holdings recorded N17.25 billion. FCMB Group saw its forex gains rise to N83.96 billion, attributed to significant naira devaluation against the dollar due to the Central Bank of Nigeria’s liberalized foreign exchange policy in 2023.
In contrast, FBN Holdings’ forex gain decreased to N8.77 billion from N23.33 billion, while Zenith Bank’s revaluation gain soared to N228.98 billion, and Fidelity Bank reported N44.09 billion.
President Tinubu’s amendment seeks to impose a 50% tax on the banks’ realized foreign exchange profits, aiming to fund capital infrastructure, education, healthcare, and welfare initiatives under the Renewed Hope Agenda. The Federal Inland Revenue Service (FIRS) will oversee the tax assessment and collection. Banks can opt to pay the tax in installments with FIRS approval. Non-compliance may result in penalties and imprisonment for bank officials.
The proposed tax has sparked mixed reactions. KPMG’s Wale Ajayi expressed concerns about the retroactive nature of the tax, suggesting it may discourage investment due to perceived unpredictability. Ajayi also highlighted potential double taxation issues, as banks have already paid 30% income tax on these profits.
Olusoji Oluwole, President of the Association of Senior Staff of Banks, Insurance, and Financial Institutions, criticized the tax as a “knee-jerk approach” and questioned why banks were singled out. He warned of potential negative impacts on bank investors and capital raising efforts.
Anthony Abakpa, President of the National Union of Banks, Insurance, and Financial Institutions Employees, echoed concerns about the tax’s potential to stifle business. Afrinvest’s economic report highlighted the policy’s abrupt announcement as creating uncertainty for investors.
There is a call for clarity on the tax’s implementation, especially for banks that have already submitted their 2023 tax returns. Stakeholders urge the government to engage in broader consultations with industry leaders to reach a more beneficial decision.
The Senate Committee on Finance is expected to submit a report on the amendment by Wednesday, which will play a crucial role in shaping the future of this proposed tax.
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