“It Is Surprising”: FG Plans to Remove N2trn From Access, UBA, GTB, Zenith, Other Banks Accounts
- The Federal Government of Nigeria is looking to increase its non-oil revenue and has its eye set on Nigerian banks
- The government is proposing a one-off tax payment on foreign exchange (forex) gains by banks, which is over N20 trillion
- Banks that fail to comply with the directive and have not remitted the assessed forex gains face a penalty of an additional 10%
Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The administration of President Bola Ahmed Tinubu has proposed an amendment to the 2023 Finance Act to tax banks 50% of profit realised from foreign exchange revaluation in 2023.
If approved by the National Assembly, the tax could potentially fetch the Nigerian government not less than N2 trillion.
Source: Getty Images
Punch reports that the tax will be debited from banks' forex windfall in 2023 to fund part of the 2024 supplementary budget.
PAY ATTENTION: Share your outstanding story with our editors! Please reach us through info@corp.legit.ng!
According to the Nation report, the levy on forex revaluation gains, otherwise known as a windfall, will finance "renewed hope" infrastructure projects, education and healthcare.
Why is the government interested in banks' forex?
Following the decision of the Central Bank of Nigeria to adopt a more liberal foreign exchange management system in 2023, the naira depreciated from N461.1/US$ in December 2022 to N951.79/US$ (Nigerian Autonomous Foreign Exchange Rate Fixing) in December 2023.
This movement helped Nigerian banks make estimated forex revaluation gains at about N4 trillion in 2023.
Some of the banks reported forex gains
- GTCO: N441.79 billion
- Zenith Bank: N228.98 billion
- UBA: N26.58 billion
- FCMB Group: N83.96 billion
- Fidelity Bank: N44.09 billion
- Access Holdings: N17.25 billion
- FBN Holdings: N8.77 billion
The banks could make so much due to their foreign assets.
Expert react
Regarding the development, Wale Ajayi, PMG Partner and Head, Tax, Regulatory and People, described the federal government decision as surprising and expected legal disputes.
He said:
“The impact of this retroactive application may raise constitutional concerns as it may violate the principle of legitimate expectations.
"It will, therefore, not be surprising if the implementation leads to legal disputes and challenges.
"Retroactive tax laws can discourage investment as potential investors may perceive the Nigerian tax system as unpredictable."
CBN shows $9bn drop in forex demand
Legit.ng earlier reported that the demand for foreign exchange by individuals and companies engaged in importation and other forex-related activities decreased by 42% year-on-year.
The total sectoral utilisation of foreign exchange indicated that 19 sectors and services received $21.12 billion in forex allocations in 2023.
This represented a 41.9% decline, or $8.87 billion, compared to the $29.98 billion allocated in 2022.
PAY ATTENTION: Donate to Legit Charity on Patreon. Your support matters!
Source: Legit.ng
