Windfall Tax: Zenith Bank, GT, UBA, 6 Others Pay N205 Billion as Other Banks Drag Feet

• The federal government introduced the Windfall tax in 2024, mandating banks to pay 70% of the profits made from FX transactions
• This sparked a lot of reactions, with several bank stakeholders making moves to lobby the government officials to change it
• The government is now set to earn over N1 trillion from the tax, as banks declare their 2024 financial year

Legit.ng journalist Ruth Okwumbu-Imafidon has over a decade of experience in business reporting across digital and mainstream media.

The federal government of Nigeria could be looking to make over N1 trillion in revenue from the windfall tax.

So far, six banks have paid about N205.59bn as windfall tax for the 2024 financial year, while several others are yet to pay.

Audited reports submitted by the banks and filed on the Nigerian Exchange Limited (NGX) show that banks are already complying, and imply that the attempts to lobby the government to reduce the tax have failed.

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Banks pay windfall tax

The highest paid so far is from Zenith Bank with a windfall tax of N63.31 billion for the year 2024, while UBA followed closely with N57.91 billion combined for 2023 and 2024.

GTCO paid N51.25bn; Stanbic IBTC Holdings paid N17.18bn, and Fidelity Bank paid N13.33bn for the 2024 financial year.

Wema Bank paid the least so far, with N2.62 billion paid as windfall levy for the 2024 financial year, the PUNCH reports.

Banks react to Windfall tax

In July 2024, the federal government imposed a 70% windfall tax on profits made from Foreign exchange transactions from 2023 to 2025.

The government argued that the naira devaluation in mid-2023 led to disproportionate gains for the banks, and the windfall levy would ensure the money goes back to the government to be used for projects of impact.

Nigerian billionaires, Femi Otedola and Tony Elumelu, supported the windfall tax despite opposition from other banking stakeholders.

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Otedola stated that it was a better use of the profits, instead of allowing them to spend up to $50 million on private jet purchases and maintenance.

Other bank stakeholders made efforts to lobby the government to reduce the percentage of the windfall tax, but the attempts yielded no results.

FG to collect over N1 trillion from Windfall tax

A top government official disclosed that the government could make over N1 trillion from the Windfall Tax/Levy, as several banks still have an outstanding N600 billion to pay.

He noted that the banks in question are still in discussions with the government, seeking ways to reduce the tax.

Apart from the N205 billion paid so far, a look at financial statements from other banks shows that there could be another N425 billion to be collected as windfall tax from 7 banks.

In its report titled ‘Nigeria’s Proposed Windfall Tax on Foreign Exchange Gains is Credit Negative for banks’, international rating company Moody shared concerns about how it could negatively impact banks.

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According to Moody, banks whose capital adequacy is close to regulatory thresholds could be negatively impacted.

Mr. Moses Igbrude, the National Coordinator of the Independent Shareholders Association of Nigeria, also noted in his comments that if the government seeks to share in the profits of banks that benefited from the naira devaluation, then it should also provide support for businesses that suffered FX losses.

Igbrude noted that the government is only taking in the profit, without taking up corresponding responsibility to provide security, power and other infrastructure.

Expert says Windfall tax can work for Nigeria

In related news, the Managing Director/Chief Executive Officer of Financial Derivatives Company, Bismarck Rewane, outlined the benefits of the windfall tax.

Rewane disclosed that the taxes are designed to capture the profits from unexpected economic events such as the naira devaluation.

He noted that if put to good use, like funding infrastructures, it would better benefit Nigerians.

Source: Legit.ng