National Assembly Approves Amendment to Finance Act, Introducing 70% Tax on Banks’ FX Profits
Abuja, Nigeria – In a significant legislative move, the National Assembly has approved an amendment to the Finance Act that imposes a 70% tax on substantial foreign exchange (FX) profits earned by banks in 2023. The decision was finalized on Tuesday during the plenary sessions of both chambers, following the review of the Joint National Assembly Committees on Finance’s report.
The Chairman of the Senate Committee on Finance, Senator Sani Musa, and his counterpart in the House, Hon. James Faleke, presented the amendment bill, emphasizing the rationale behind the new tax measure.
The Joint Committee’s report highlighted that the banks experienced a windfall profit due to the Federal Government’s exchange rate unification policy. This policy resulted in significant gains from FX allocations to selected commercial banks, which the government now seeks to tax.
“The banks enjoyed a windfall as a result of the exchange rate unification policy of the Federal Government,” the report stated. “The windfall was a result of FX allocation to selected commercial banks. The policy does not permit the use of windfall for dividend payments.”
The amendment stipulates that the new tax provisions will be retroactive, taking effect from January 1, 2023. The levy will be divided, with 70% of the realized profits from all exchange transactions of banks going to the federal government and the remaining 30% retained by the banks.
The amendment also includes strict penalties for non-compliance. Banks that fail to pay the windfall profit levy will be required to pay the withheld levy along with a fine of 10% per annum and interest at the prevailing Central Bank of Nigeria’s minimum discount rate.
This legislative change aims to ensure that the windfall profits resulting from the exchange rate policy are used to benefit the national economy rather than solely enriching the banks. The move underscores the government’s commitment to fiscal responsibility and equitable distribution of financial gains.
