The President of the Chattered Institute of Bankers, Prof. Pius Olanrewaju has called on the government to reduce the tax on foreign exchange gains to 40 per cent as he argued that 70 per cent tax will land banks into crisis.
The CBN president made the call during an interview monitored by THE WHISTLER saying that the cost will be transferred to bank customers.
He admitted that the Nigerian economy is having some challenges, adding that the current government is determined not to use ways and means financing from the central bank.
President Bola Ahmed Tinubu had requested the amendment of the Finance Act of 2023 and introduced a 50 per cent windfall tax on banks.
Recall that the CBN had directed the banks not to pay dividends from the foreign exchange gains made as a result of the devaluation of the naira.
The CIBN boss said that the tax on foreign exchange gains has been increased to 70 per cent from the 50 per cent that the president requested from the National Assembly.
He said, “A lot of consequences are going to follow. It will look like a double taxation to the banks. That’s the way we view it. Because these banks are already paid their tax before. They are not aware of this levy. The levy is somehow, the second point about this levy is that it’s retroactive.
“The first thing remains that you move it again from 50 to 70 per cent which means it’s going to have a telling effect on the profitability of the banks and moreover, we believe there is no element of fairness in the issue of the windfall, because from the look of things objectively considered, you will realize that it’s not only bank that has had an advantage as far as the windfall is concerned.”
Olanrewaju maintained that the tax will discourage foreign investors, adding that the levy should be reasonable in a manner that will not have a “detrimental effect on banking stability.”
“We are suggesting that even we are not saying we are not advanced to issue of levy, let the levy be reasonable, and we know that we have a government that listen to the feedback from the populace, and we have the opinion that this levy should be reduced to 40, per cent” he said.
He added, “But now we are hearing that all foreign exchange transaction. By the time there are so many foreign exchange transaction taking place in the bank. If you take 70 per cent from that, the banks will run into crisis and that is the bitter truth.
“So we are saying that let us the windfall is clear, it’s not to everybody. We also want development because bank is also part of the ecosystem. We want it is when it is where with the system that the banks also can stand.
“What we are saying in essence, it becomes a double taxation. If for example, we had paid the enormous tax and now you are bringing it in levy and the levy is so detrimental to their profitability.”
The CBN president said the tax would result to additional cost for banks which would be transferred to their customers.
Olanrewaju said, “It’s likely to have a multiplier effect, the effect that we cannot even determine for now, because the thing continues to involve a lot of, you know, there are a lot of implications that it’s likely to follow.
“What will happen to those one is that the cost, operational cost will increase. And banks, too, because they are not father Christmas, they are in the business to make money will want to pass over those costs to the customer.
“What we are hearing from the heart, although we are still studying it critically, is that it’s being extended to all foreign exchange transactions, all international transactions, beyond even the windfall.”
