Ogasabi and 9AM News Nigeria observed that the most talked-about and key component of the new finance bill was a proposal mandating banks to turnover as high as 50% of their profits from foreign exchange operations as tax to the federal government. However, despite the outcry from finance experts, thought leaders, and legal luminaries in Nigeria over the new tax policy, the finance bill, which was eventually passed by the Senate, further raised the tax rate on forex from the initial 50% proposed by the federal government to 70%.
Senator Sani Musa, chairman of the Senate Committee on Finance, said while reading a report of his committee before the bill was passed, “the levy shall be 70% of the realized profits of all exchange transactions from banks. Any bank that fails to pay the windfall profit levy to the service, and has not executed the deferred payment agreement by 31st December 2024, shall be liable to pay a windfall levy withheld in addition to a fine of 10% of the levy withheld or not remitted per annum and an interest at the prevailing Central Bank of Nigeria (CBN) minimum discount rate.”
The Senate committee also extended the application of the new forex policy, making it effective from the end of 2023 to the end of 2025. This implies that banks must declare their forex profits from the start of 2024 and pay a 70% tax on the total accrued forex profits. This is contained in clause two of the amendment.
After the full reading of the bill by the Senate president, he asked the Senate Majority Leader, Senator Opeyemi Bamidele, to move a motion for the third reading of the bill before it was finally passed into law. God’swill Akpabio, president of the Senate, then said, “Distinguished colleagues, a bill for an act to amend the finance act 2023 to impose and charge windfall levy on banks and to provide for the administration of the levy and matters related thereto, 2024, third reading taken and passed.”
The Senate also passed the 2024 Appropriation Act with an injection of an additional ₦6.2 trillion to cater for the costs of implementing a new minimum wage and an economic stimulus plan.
9AM News Nigeria recounts that President Bola Tinubu wrote to the Senate earlier in the year to amend the 2023 Finance Act to incorporate a law requiring banks to pay 50% of their earnings from foreign exchange trade in tax to the federal government through the CBN. The amendment also states that any bank refusing to pay the stipulated tax in full will be forced to pay the tax amount along with an additional 10% of the total tax sum to the CBN. It also prescribes a possible jail term for executives and principals of banks found guilty of withholding tax.
Reactions:
Ogasabi has scooped diverse reactions and outcry over the new and controversial tax policy. Many opinions suggest that such a tax policy is illegal. PwC Nigeria raised concerns that the new tax policy could discourage investments in Nigeria. Renowned lawyer and Senior Advocate of Nigeria, Olisa Agbakoba, said the proposed amendment was a bad idea and that the burden of the tax would eventually be passed down to the customers of the banks. Others have advised the banks to challenge the tax policy in court, describing it as illegal.
