A 70% windfall tax on Nigerian lenders foreign-exchange gains is an excessive burden on a sector that’s facing economic headwinds and may hamper efforts by operators to meet tightened capital rules, an industry group said.
The tax “is excessively burdensome and ill-timed, particularly considering the ongoing bank-recapitalization efforts,” the Bank Directors Association of Nigeria said in a statement.
“We respectfully urge the National Assembly to revisit these amendments and engage in constructive discussion.”
Nigeria hit banks with the tax to improve the nation’s fiscal position.
Lenders with foreign-currency assets made significant profits when converting the assets to naira after the central bank relaxed exchange controls in June 2023 and again in January to end dollar shortages and lure investors. The move led to a slump in the naira, which has depreciated about 70% against the dollar since June 2023.
The new tax comes after the central bank in March gave lenders two years to bolster their capital, ordering those with international units to increase capital 10-fold to 500 billion naira ($314 million) and those with local operations by eight-fold to 200 billion naira.
The new levy on foreign-currency gains is effective until the end of 2025.
Moody’s Ratings said last month the tax will reduce the profit available to banks to cushion against bad loans as well as trim their retained earnings, which is a part of regulatory capital.
“Such a high levy has the potential to stifle growth and innovation within the banking sector,” the industry group said. “We also request clarification on what constitutes foreign-exchange transactions to be taxed and the treatment of banks that may incur losses rather than gains,” it said.
Follow the MoneyCentral Nigeria channel on WhatsApp: Click here!
