Bankers and other financial sector stakeholders are urging President Bola Tinubu to withhold his approval of the Finance Act (Amendment) Bill 2024, recently passed by the National Assembly. They are calling for a reconsideration of the 70% foreign exchange (forex) windfall levy on banks.
Last week, President Tinubu submitted a supplementary budget proposal to the National Assembly, seeking to increase the 2024 budget by N6.2 trillion, raising it from N28.7 trillion to N34.9 trillion. To fund this supplementary budget, the government proposed amending the 2023 Finance Act to include a 50% one-off tax on forex revaluation gains by banks for the 2023 business year. The National Assembly increased this levy to 70%, retroactive to January 1, 2023.
The amended Bill states that any bank failing to pay the windfall profit levy to the Federal Inland Revenue Service, without executing the deferred payment agreement at the start of the regime, will be liable for the levy withheld or unremitted, along with a 10% fine per annum and interest at the prevailing Central Bank of Nigeria minimum discount rate.
Shareholders and financial sector stakeholders have expressed unanimous concern that this levy could be counterproductive, given the banks’ critical role in ongoing economic reforms and the current banking recapitalisation exercise.
The Chairman of the New Dimension Shareholders Association of Nigeria stated, “The Federal Government’s decision to impose a windfall tax on banks due to FX gains is not only immoral but an unjust attempt to undermine the positive financial performance of banks in this challenging environment, significantly reducing shareholder funds.”
They urged President Tinubu to withhold his assent to allow for further consultation and dialogue on the issue.
The Chartered Institute of Bankers of Nigeria (CIBN), representing bankers, warned that the levy could reduce investment, decrease liquidity, increase costs, and negatively impact Nigeria’s economic growth. In a statement signed by its President, Professor Pius Olanrewaju, the CIBN noted that the forex windfall tax could lead to currency volatility and double taxation since banks already paid 30% income tax for their 2024 tax returns.
“Will this not amount to double taxation? Or will the tax already paid be deducted from this new imposition? This proposed tax is unfair and discriminatory, singling out banks. Other sectors or businesses that recognized similar forex gains in 2023 are not included. In countries where windfall taxes are imposed, there are corresponding incentives to cushion the effect on affected entities, which is not the case here,” CIBN stated.
CIBN emphasized the need for careful consideration and thorough analysis before imposing taxes on forex gains by banks and proposed stakeholder consultations involving the Ministry of Finance, the Central Bank of Nigeria, banks, and other relevant stakeholders for a holistic review of the implications.
Rasheed Bolarinwa, President of the Association of Corporate & Marketing Communication Professionals of Banks (ACAMB), highlighted the significant support banks have shown for the government’s economic agenda and argued that imposing a new levy would be counterproductive. He stressed the need for further extensive consultation and urged the president to withhold his assent.
“We shouldn’t kill the goose that lays the golden eggs. Government should reconsider. We believe the President, who has demonstrated a listening ear on many occasions, will provide fair hearing to the banks,” Bolarinwa said.
