Economist Warns Against 70% Windfall Tax on Banks
A renowned economist, Bismarck Rewane, has warned that the 70% windfall tax imposed on banks in Nigeria is punitive and may deter investors. Rewane, the Managing Director of Financial Derivatives Company Limited, made this statement on Channels Television’s Politics Today programme on Thursday.
According to Rewane, the 70% windfall tax is too high and will discourage investors who feel they do not get any subsidy when they make a loss, but are penalized when they make a profit. He advised the government to peg the tax at the initially proposed 50%.
The windfall tax, which was initially proposed by President Bola Tinubu at 50% on bank foreign exchange profits, was increased by the Senate to 70% and passed into law in July. The tax will run from 2023 to 2025.
GTCO, Ecobank, Zenith, UBA, FCMB, Fidelity, Stanbic, and Access were among the top winners of FX gains in 2023, with a cumulative profit of N1.4 trillion.
Rewane believes that windfall taxes are global phenomena and can be used for social good, but only when they are well-utilized and managed. He emphasized that the windfall tax collection is vital to double the revenue of the government and achieve a $1 trillion economy, which is currently less than $400 billion.
In addition, Rewane proposed a "joint venture" where companies that made excess windfall taxes can swap their taxes for projects. He cited examples of Dangote’s involvement in the Lagos Airport and Tin Can Island projects, and MTN’s involvement in the Enugu to Onitsha project.
Rewane believes that this approach would be a win-win situation for all parties involved, as the government would benefit from the projects, which would have social impacts, and the banks would retain their assets.
