BDAN has distanced itself from the views expressed by the bank chairmen regarding the Forex Windfall Tax.

Mustafa Chike-Obi, BDAN Chairman

The Bank Directors Association of Nigeria (BDAN) has publicly separated itself from the contentious opinions expressed by certain bank chairmen regarding the proposed foreign exchange windfall tax, indicating a growing rift within the banking sector.

The association emphasized that the opinions voiced by some chairmen in favor of the tax are individual perspectives and do not reflect the collective viewpoint of the banking community. BDAN has assured the public that its official position will be disclosed following its upcoming board meeting on August 12, 2024, which has led to speculation about the potential outcomes.

Mustafa Chike-Obi, the Chairman of BDAN, conveyed this clarification through his X (formerly Twitter) account, stating: “I have reviewed the personal opinions of some bank chairmen concerning the windfall tax. These opinions do not represent the banking community. BDAN will share its views after our board meeting on the 12th, addressing this and other significant matters affecting our community.”

It is noteworthy that several bank chairmen have expressed their support for the recent amendments to the Finance Bill, which retroactively imposes a 50 percent levy (initially approved at 70% by the National Assembly) on foreign exchange (FX) gains reported by banks in their 2023 annual financial statements.

Among the notable supporters is Femi Otedola, Chairman of FBN Holdings and a prominent figure in Nigeria's financial and capital markets, who has endorsed the new policy introduced by the Bola Tinubu administration. Otedola has also criticized bank executives for excessive spending, particularly regarding the acquisition and upkeep of private jets.

“Nigerian banks are incurring approximately $50 million annually just for the maintenance of private jets, with over $500 million spent on the purchase of nine private jets by four banks,” Otedola remarked in a recent statement. “This degree of extravagance severely undermines public confidence in our financial institutions and diverts essential resources from critical areas such as operational efficiency, technological advancement, and customer service.”

Tony Elumelu, the Chairman of the United Bank for Africa, expressed his support for the initiative, stating that it is designed to combat poverty. The entrepreneur and philanthropist highlighted the importance of “democratizing prosperity for Nigerians, ensuring that everyone has access to a better quality of life.” Elumelu remarked, “We endorse the government’s efforts to reduce poverty through the windfall tax; however, we also assert that no particular group should bear the brunt of this initiative. The government must continue to foster job creation while allowing businesses to flourish. Shared prosperity is essential—benefiting business owners, everyday Nigerians, and both domestic and international investors. It is crucial that all parties find satisfaction in this process. I am encouraged by the results of the meeting and look forward to a more prosperous and joyful society in the future.”

This statement followed a meeting held on Wednesday, where government officials convened with representatives from the banking sector, including Elumelu and Ladi Balogun, the Group CEO of FCMB, to deliberate on the windfall tax. Finance Minister Wale Edun characterized the meeting as “constructive, informed, and based on data,” noting that President Bola Tinubu was actively involved in the discussions.

The Finance Act (Amendment) Bill 2024, which was approved by the House of Representatives on Tuesday, July 23, 2024, specifies in Section 2, subsection 31(a) that the Federal Inland Revenue Service “shall assess the realized profits, collect, account, and enforce payment of tax due under section 30.” This aligns with the authority granted to the Service under the Federal Inland Revenue Service (Establishment) Act 2007. Additionally, Section 31(b) permits the Service to enter into a deferred payment agreement with assessed banks, provided that such an agreement is finalized on or before December 31, 2024.

The Nigerian FX windfall tax is a result of an internal government decision to harmonize exchange markets, leading to the devaluation of the domestic currency. This has caused a restatement of corporate comprehensive incomes for the previous year.

Proshare Research, a financial intelligence company based in Lagos, in its analysis titled “The Pains of A Windfall Tax: Appraising the NASS’s Financial Act Amendment,” explained that Nigerian banks would need to pay tax arrears on liabilities for 2023, requiring a restatement of their accounts by the end of December 31, 2024.

Furthermore, subsection 30 has been revised to extend the implementation period to the 2025 financial year. According to the subsection, a 70% levy shall be imposed and paid to the benefit of the Federal Government of Nigeria on realized profits from all foreign exchange transactions of banks for the 2023 to 2025 financial years. The penalty for non-compliance with the Act would be an additional liability of 10 percent “of the tax withheld or not remitted per annum, and interest at the prevailing Central Bank of Nigeria minimum rediscount rate,” as well as imprisonment of the principal officers for up to three years.