The Bank Directors Association of Nigeria has criticized the proposed 70% windfall tax on profits from foreign exchange transactions by banks, calling it excessive and poorly timed.
In a press statement issued following their board meeting on Monday, the association expressed respect for the government’s intentions but raised concerns about the scale of the tax, its timing, and the unclear details surrounding its implementation.
Mustafa Chike-Obi, Chairman of the Board of Directors, stated, “While the imposition of this windfall tax seems to address the current economic climate, we believe a 70% tax rate is excessively burdensome and poorly timed, especially given the ongoing bank recapitalization efforts.
Such a high rate could hinder growth and innovation in the banking sector, impacting the quality of services for customers and the broader economy.
“Additionally, we stress the importance of consulting all banking sector stakeholders before enacting significant changes to the Finance Act 2023. Open dialogue and negotiation are crucial for ensuring policies are fair and effective.”
The association also expressed concerns about the ambiguous language of the amendment, raising questions about whether the windfall tax will be applied as a total tax charge on banks, including existing taxes like Company Income Tax and others.
They also seek clarification on what constitutes ‘FX transactions’ to be taxed and how losses during this period will be treated.
They urged the government to provide clear guidelines to prevent further uncertainty.
BDAN pointed out that Nigerian banks are already among the most heavily taxed globally, partly due to the Asset Management Corporation of Nigeria levy on total bank assets.
The association called on the National Assembly to revisit the amendment and engage in discussions with banking sector stakeholders.
“We believe that by working together, we can create a framework that balances the need for revenue generation with the goal of maintaining a thriving banking environment that supports sustainable economic growth,” BDAN concluded.
Earlier this month, BDAN clarified that it did not support the personal views of some bank chairmen who backed the proposed foreign exchange windfall tax.
