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Nigeria to Impose 50% Tax on Banks’ FX Gains. In a move to bolster national infrastructure and public services, the federal government has proposed a 50% tax on profits realized by banks from foreign exchange revaluation for the year 2023.
This plan is detailed in the amendments to the 2023 Finance Act, which President Bola Tinubu has submitted to the National Assembly for approval.
The anticipated revenue from this “windfall tax” is earmarked for the “Renewed Hope” projects, which include significant investments in infrastructure, education, healthcare, and other critical sectors.
According to the document obtained by africataxreview.com, the Federal Inland Revenue Service (FIRS) will be responsible for collecting this tax.
“There shall be levied and paid to the benefit of the Federal Government of Nigeria a tax of 50% on the realized profits from all foreign exchange transactions of banks within the 2023 financial year,” the document states.
It further mandates that the FIRS will assess, collect, account for, and enforce the payment of this tax, as per the Federal Inland Revenue Service (Establishment) Act 2007.
The amendment also stipulates severe penalties for non-compliance. Banks that fail to remit the required tax will face additional charges of 10% on the withheld amount, interest at the Central Bank of Nigeria’s minimum discount rate, and potential imprisonment of key principal officials.
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Nigeria to Impose 50% Tax on Banks’ FX Gains: The Trajectory
Earlier reports revealed that President Tinubu sought the Senate’s approval to amend the 2023 Finance Act, aiming to levy taxes on foreign exchange gains reported by commercial banks in their 2023 financial statements.
The President explained that the funds generated from this tax would support capital infrastructure development, education, healthcare access, and public welfare initiatives.
Data indicates that major commercial banks in Nigeria recorded N3.37 trillion in foreign exchange revaluation gains in FY 2023 and Q1 2024.
This substantial gain came after the Central Bank of Nigeria (CBN) announced the unification of the foreign exchange markets in June, a move aimed at narrowing the gap between the official market rate and the parallel market rate.
While this led to significant losses for businesses in the industrial and consumer goods sectors, the banking sector saw considerable gains, with the naira losing nearly 100% of its value by the end of December 2023.
Despite the challenges faced by the private sector, the three tiers of government have benefited from the FX revaluation gains, which now constitute around 20% of federal allocations, a notable increase from the previous 1.32% earlier in 2023.
This windfall has provided a significant boost to federal revenues at a time when businesses, especially in manufacturing and industry, have recorded substantial losses.
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