Reconsider 70% forex windfall tax, stakeholders tell FG

Opposition to the imposition of a 70 per cent foreign exchange windfall tax on commercial banks rose yesterday with stakeholders asking the federal government to reconsider the tax. They asked President Bola Ahmed Tinubu not to assent the amended Financial Bill passed by both the Senate and House of Representatives. Daily Trust reports that the […]

Opposition to the imposition of a 70 per cent foreign exchange windfall tax on commercial banks rose yesterday with stakeholders asking the federal government to reconsider the tax.

They asked President Bola Ahmed Tinubu not to assent the amended Financial Bill passed by both the Senate and House of Representatives.

Daily Trust reports that the Senate, last week, passed Tinubu’s request to amend the Finance Act to impose a one-time windfall tax on banks’ foreign exchange profits in 2023.

The government also proposed the imprisonment of principal officers of banks who fail to comply with the one-time tax. It also proposed a penalty of 10 per cent of the levy withheld or not remitted annually and interest at the prevailing Central Bank of Nigeria (CBN) minimum rediscount rate.

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The House of Representatives also passed the Bill on Tuesday, now awaiting Presidential assent.

The Bill when signed into law would take a retroactive effect from January 1, 2023.

Bankers, experts and other critical stakeholders in the Nigerian financial sector stated that the introduction of the levy would be counterproductive given the critical contributions of the banks to the ongoing economic reforms and the current banking recapitalisation exercise.

The Chartered Institute of Bankers of Nigeria (CIBN), the umbrella body for bankers, stated that the implementation of the levy could lead to reduced investment, decreased liquidity, and increased costs and negatively impact Nigeria’s economic growth and development.

In a statement signed by its President, Professor Pius Olanrewaju, CIBN noted that the forex windfall tax could worsen currency volatility due to reduced market participation, with a potential to destabilise the economy.

CIBN stated that the forex windfall tax could amount to double taxation as banks have paid 30 per cent income tax when they filed 2024 tax returns.

“Will this not amount to double taxation? Or the tax already paid be deducted from this new imposition? This proposed tax will violate fairness and equity in taxation as banks are the only entity singled out for this payment. This is discriminatory. What about other sectors or businesses that have recognised the same foreign exchange gains in their books in 2023? In countries where such windfall tax has been imposed, there is always a corresponding incentive to cushion the effect on the affected entities but nothing to that effect has been stated in the proposed bill,” CIBN stated.

President, Association of Corporate & Marketing Communication Professionals of Banks (ACAMB), Rasheed Bolarinwa, stated that banks should not be burdened with a new levy.

According to him, with the ongoing recapitalisation, which is also aimed at supporting the federal government’s $1 trillion economic agenda, banks need more monetary and fiscal incentives now.

“We shouldn’t kill the goose that lays the golden eggs. Government should have a rethink. We think further consultation is needed in this case. We know the President has a listening ear, as demonstrated on many occasions, and we expect banks should be given fair hearing on this,” Bolarinwa, who leads the umbrella body for spokespersons for all banks, said.

A former President of Chartered Institute of Stockbrokers (CIBN), Mr Olatunde Amolegbe, said the forex windfall levy could be counterproductive and have negative effect on the ongoing banking recapitalisation, which was intended to boost the government’s $1 trillion economic agenda.

According to him, imposing such levy in the middle of ongoing banking recapitalisation may send wrong signals to investors and impinge on the ability of banks to raise much-needed capital.