Ten Banks Cough Out N316bn in Windfall Tax on FX Gains
By Lydia Oluremi
Ten of Nigeria’s commercial banks paid a total of N316 billion to the government from the foreign exchange gains brought about by naira devaluation after the forex market was liberalised in 2023.
The windfall tax was introduced last year in line with the Central Bank of Nigeria’s September 2023 policy prohibiting banks from using foreign currency-related profits for operational expenses and dividends.
Data compiled by Markets Reporters from earnings report show that Zenith Bank, the country’s biggest bank by net profit, paid the highest windfall tax of N63 billion, followed by the United Bank for Africa which coughed out N58 billion.
Access Holdings paid N56.7 billion, while the country’s most valuable listed lender Guaranty Trust Holding Company was charged N51 billion. First HoldCo, the parent of FirstBank, was charged N33.5 billion.
Midsize lenders FCMB Group, Stanbic IBTC Holdings and Fidelity paid N17.7 billion, N17 billion, and N13.3 billion respectively, while Wema and Sterling Holdings coughed out N3 billion each.
On 17 July, the Nigerian presidency announced a one-off 50% windfall tax on banks’ foreign-currency revaluation profits in 2023 to raise funding for infrastructure and other critical spending as part of a N6.2 trillion addition to the 2024 budget.
The government later imposed a levy of 70% on the realised profits from all foreign exchange transactions of banks within the 2023 to 2025 financial years.
In its response, the Bank Directors Association of Nigeria described the 70 percent windfall tax rate as “excessively burdensome and ill-timed, particularly considering the ongoing bank recapitalisation efforts”.
“Such a high levy has the potential to stifle growth and innovation within the banking sector, ultimately affecting the quality of services we provide to our customers and the broader economy,” it said in a statement at the time.
Global credit rating agency Moody’s said the proposed windfall tax would significantly reduce the profits available to the lenders for problem-loan provisioning and transfers to retained earnings, which form part of regulatory capital.
“The windfall tax will have a particularly negative effect on banks whose capital adequacy is close to regulatory thresholds,” it said in a statement.
