The Bank Directors Association of Nigeria said that while the imposition of the windfall tax appears to be a response to the current economic climate, the 70 percent tax rate is excessively burdensome and inappropriate, especially in light of the ongoing efforts to recapitalize banks.
In a press release by its Chairman, Mustapha Chikeobi, the association formally responded to the recent introduction of a 70 percent levy on profits from banks’ foreign exchange operations for the financial years 2023-2025.
The board said it recognizes and respects the government’s intention in implementing the decision. He, however, considers it important to express concern over the lack of clarity surrounding the level of the levy, its timing, and its implementation.
Chike-obi said, ” Such a high levy has the potential to stifle growth and innovation within the banking sector; ultimately affecting the quality of services we provide to our customers and the broader economy.
“Moreover, we believe that it is vital for all stakeholders in the banking sector to have been consulted prior to the enactment of such significant changes in the Finance Act 2023. Open dialogue and negotiation are essential to ensure that policies are both equitable and effective.”
The Board noted that a key concern is the ambiguity in the wording of the proposed amendments, leaving important questions unresolved. For example, whether to introduce a special tax as an aggregate tax on banks, including other taxes already levied, such as corporate tax, tertiary education tax, and the National Information and Development Levy (NITDL).
“We also request clarification on what constitutes ‘FX transactions’ to be taxed and the treatment of banks that may incur losses rather than gains during this period. We urge the government to provide clear guidelines on this matter to avoid further uncertainty,” the Directors urged.
The Directors stressed that Nigerian banks are among the most highly taxed in the world due to the AMCON tax levied on banks’ total assets, and therefore recommend a consolidated and thorough check of all taxes and levies levied on banks in the future.
They said it was also important to reassure the banking community that future levies and taxes would not be imposed arbitrarily. The directors called on the National Assembly to reconsider the proposed amendments and engage in constructive discussions with banking sector stakeholders.
“By collaborating, we can develop a framework that effectively balances the need for revenue generation with the imperative of fostering a thriving banking environment that supports sustainable economic growth.
“We commend the Central Bank of Nigeria for their recent efforts in stabilizing the banking sector; we remain committed to supporting and collaborating with regulators, government entities, and other stakeholders to find solutions that benefit all parties involved,” the press release stated.
