Forex Windfall: Why Bank CEOs Are Angry, Shunned Meeting With President

More facts are emerging while some chief executive offices of commercial banks in the country shunned a meeting with President Bola Ahmed Tinubu on Wednesday over the recently imposed forex windfall tax.

The windfall tax, described by analysts as a higher tax was imposed by the government on commercial banks in the country for benefiting from favourable foreign exchange market conditions.

Recall that the national Assembly, had while amending the 2024 Budget last week, increased the share of the federal government from the windfall tax on banks’ foreign exchange (FX) gains to 70 percent giving the banks 30 percent.

According to the amended Act, passed by the Senate and House of Representatives last week, “a levy of 70 percent on the realised profits from all FX transactions of banks within the 2023 to 2025 financial years would be levied and paid to the benefit of the federal government”.

The Acts further stated, “The Federal Inland Revenue Service shall assess the realised profits, collect, account and enforce payment of tax payable under section 30 in accordance with the powers of the Service under the Federal Inland Revenue Service (Establishment) Act 2007.’

The federal government had earlier proposed a sharing formula of 50- 50 with commercial bank in the country.

The meeting of bank’s chief executive with President Tinubu on Wednesday, the magazine learned, was to seek the understanding of banks on the issue.

However, many chief executives of the banks in the country shunned the meeting with Tinubu, except Ladi Balogun and Tony Elumelu of the FCMB and UBA who attended the meeting with the president at the State House, Abuja.

Apart from Tinubu other top government officials who attended the meeting include Femi Gbajabiamila, Chief of Staff to the President, Wale Edun, Minister of Finance and Coordinating Minister of the Economy, and Zacch Adedeji, FIRS Chairman.

There are currently over 20 commercial banks operating in the country, according to checks from the Central Bank of Nigeria, CBN.

Sources who spoke with the magazine said the absence of some bank chief executive at the meeting called at the instance of the federal government, was a clear “signal’ that the banks’ management are not happy with the decision taken by the federal government over the issue.

“The message from the administration to banks, is loud, and clear; it wants to stiffen their operations, bearing in mind that a huge chunk of the profit of commercial banks in the country is realised from forex as seen in the last year Profit declared by the banks. What this means is that they are being made to part with a larger part of that,” a financial expert said in anonymity.

According to the source “You don’t expect them to be happy with such decisions, even though the federal government said the period only covers from January this year. Many banks know they are not doing well due to the current economic headwind, so they will have to draw from their last year profit to meet the demand of the federal government”.
The federal government has threatened to sanction commercial banks which fail to remit the windfall to the federal Inland revenue Service, FIRS, before the end of the year.

The amended 2024 Finance Act had made December 31, 2024 as deadline for commercial banks to remit the funds to the federal government, failure which they will be forced to pay 10 percent per annum of the tax withheld or not remitted, while managers of such banks risks three months imprisonment.

The Act said defaulting banks “shall be liable to pay the tax withheld or not remitted in addition to a penalty of 10 percent of the tax withheld or not remitted per annum and interest at the prevailing Central Bank of Nigeria (CBN) minimum rediscount rate and its principal officers are liable to be imprisoned for not more than three months

“This situation has really put the banks in a tight rope as some of them are panning to prepare their End of the Year full Report,” another source told the magazine on Friday.

President Tinubu has signed into law the Finance Act which took effect September 1, 2023.

Meanwhile, a top source said the banks decided to send representatives to the meeting with the president because “it would be crowdy for all the CEOs” to attend the meeting.