70% Windfall Tax: Bank Directors Call It Excessive and Ill-Timed

The Bank Directors Association of Nigeria (BDAN) has expressed strong concerns over the proposed 70% windfall tax on profits from foreign exchange transactions by banks, labeling it as both excessive and ill-timed. In a recent statement following their board meeting, BDAN voiced their apprehensions about the magnitude, timing, and implementation ambiguities of the tax. Chairman Mustafa Chike-Obi articulated the association's position, stating, “While the government’s intention behind this tax might be well-meaning, we find the 70% rate to be excessively burdensome and poorly timed, especially given the current bank recapitalisation efforts. Such a steep levy risks stifling growth and innovation within the banking sector, which could ultimately degrade the quality of services provided to customers and impact the broader economy negatively.”

The association also highlighted concerns regarding the lack of consultation with banking sector stakeholders before implementing this significant change in the Finance Act 2023. BDAN emphasizes that open dialogue is crucial to ensure that policies are fair and effective. BDAN’s statement further outlined the need for clarification on several points, including whether the windfall tax will be a Total Tax charge that incorporates existing taxes, the definition of ‘FX transactions’ to be taxed, and how losses versus gains will be treated. The association also pointed out that Nigerian banks are already heavily taxed, partly due to the Asset Management Corporation of Nigeria levy on bank assets.

The association has called on the National Assembly to revisit the amendment and engage in constructive discussions with banking sector stakeholders to create a balanced framework that fosters a thriving banking environment and supports sustainable economic growth. Earlier, BDAN had distanced itself from the personal opinions of some bank chairmen who supported the proposed tax, underscoring a unified stance against the measure.