Nigerian banks have collectively paid N205.49 billion ($132 million) in windfall taxes to the Federal Government, a move proposed by President Bola Tinubu to strengthen the nation’s financial reserves.
Last year, Nigerian lawmakers approved a 70% tax on foreign-exchange gains earned by banks. This tax was set to take effect from the start of the new foreign-exchange rate policy, continuing until the end of 2025.
The naira’s sharp depreciation following Tinubu’s relaxation of foreign exchange controls in 2023 resulted in substantial profits for some banks.
In July 2024, the Nigerian government passed the Windfall Tax Bill, amending Section 29A of the Finance Act 2023, which imposed taxes on realized foreign exchange gains made by banks.
As of now, nine banks have released their full-year 2024 earnings reports, confirming that the windfall tax payments have begun to be made to the Federal Inland Revenue Service (FIRS).
Zenith Bank topped the list with the highest payment, contributing N63.3 billion, followed by United Bank for Africa (UBA) with N57.9 billion and Guaranty Trust Holding Company (GTCO) at N51.24 billion, according to data compiled by MoneyCentral.
GTCO reported in its 2024 full-year financial statement: “The Federal Inland Revenue Service (FIRS) has assessed the Bank’s liability for the windfall tax, advising a total provision of N51 billion, which includes N23.7 billion for the year 2023. The Bank has recognized this provision in its financial statements, reflecting its commitment to comply with tax obligations and contribute to national revenue.”
Other banks that paid the tax include Stanbic IBTC with N17.1 billion, Fidelity Bank with N13.3 billion, and Wema Bank with N2.616 billion.
Ecobank Transnational, FCMB, a tier-2 lender, and FirstHoldCo Plc have not disclosed any windfall tax payments. FirstHoldCo Plc, which reported a currency revaluation loss of N332.78 billion in 2023, is likely exempt from the tax.
As of the time of this report, Access Bank had yet to release its full-year 2024 results.
The windfall tax is levied on foreign currency revaluation gains, which include net gains from the revaluation of foreign currency-denominated assets and liabilities, as well as the effective portion of gains on derivatives designated in fair value hedge of foreign currency risks.
Moody’s Ratings indicated last year that the increase in the windfall tax rate to 70% from the previous 50% would have negative credit implications for banks.
This new tax comes after the Central Bank of Nigeria (CBN) gave banks two years to strengthen their capital, ordering international banks to raise their capital ten-fold to N500 billion ($314 million) and local banks to increase their capital by eight-fold to N200 billion.
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