By Francesca Hangeior

The Bank Directors Association of Nigeria has termed the proposed 70 per cent windfall tax on profits generated from foreign exchange transactions by banks as not only excessive but also ill-timed.

A press statement from the association after its board meeting on Monday said that while they respect the intentions of the government in making the decision, it had concerns about the magnitude of the levy, its timing and the ambiguities surrounding its implementation.

The chairman of the Board of Directors of the association, Mustafa Chike-Obi, who signed the statement said, “While the imposition of this windfall tax appears to be a response to the current economic climate, we suggest that a 70 per cent tax rate is excessively burdensome and ill-timed, particularly considering the ongoing bank recapitalisation efforts. Such a high levy has the potential to stifle growth and innovation within the banking sector, ultimately affecting the quality of services we provide to our customers and the broader economy.

“Moreover, we believe that it is vital for all stakeholders in the banking sector to have been consulted prior to the enactment of such significant changes in the Finance Act 2023. Open dialogue and negotiation are essential to ensure that policies are both equitable and effective.”

The association said that its primary concern lies in the ambiguities of the language in this amendment which leaves critical questions unanswered, “such as, whether the windfall tax will be implemented as a Total Tax charge on banks, incorporating other taxes already levied such as Company Income tax, Tertiary Education Tax, National Information Development Levy etc We also request clarification on what constitutes ‘FX transactions’ to be taxed and the treatment of banks that may incur losses rather than gains during this period. We urge the government to provide clear guidelines on this matter to avoid further uncertainty.”

BDAN also argued that Nigerian banks were amongst the most heavily taxed in the world due to the burden of the Asset Management Corporation of Nigeria levy which is imposed on the total assets of banks.

It went on to call on the National Assembly to revisit this amendment and engage in constructive discussions with stakeholders in the banking sector.

“By collaborating, we can develop a framework that effectively balances the need for revenue generation with the imperative of fostering a thriving banking environment that supports sustainable economic growth,” BDAN concluded.

Earlier in the month, BDAN distanced itself from the personal views of some bank chairmen on the proposed foreign exchange windfall tax, who expressed support for the move.