Nigeria Proposes 50% Windfall Tax on Banks’ Foreign Exchange Gains to Balance Economy
In a move aimed at recovering losses suffered by the manufacturing sector, the Nigerian government has proposed a 50% windfall tax on banks’ foreign exchange (FX) gains in 2023. The announcement was made by the Chairman of the Federal Inland Revenue Service, Zacch Adedeji, during a meeting with the Senate Committee on Finance.
According to Adedeji, the banking sector declared significant FX gains, while the manufacturing sector suffered losses of N1.7 trillion when the Naira was floated in the FX market in 2023. The government is concerned that it may not be able to collect taxes from the manufacturing sector for the next five to ten years as they are yet to recover their losses.
Adedeji emphasized that the government is not targeting banks’ profits, but rather seeking to recover losses from the other side of the economy. He noted that the Central Bank of Nigeria issued a circular in February, stating that the gains from FX transactions cannot be spent on dividends or expenses, as the money is not the banks’.
As part of the 2024 supplementary budget, President Bola Ahmed Tinubu has requested lawmakers to amend the 2023 Finance Act to allow for the windfall tax on bank’s FX earnings. This move is expected to generate 50% revenue from a collective FX N3.7 trillion gains from banks in 2023.
The government hopes that the windfall tax will help balance the economy and address the losses suffered by the manufacturing sector.
