Government to Implement 50% Tax on Banks’ Realized FX Profits in Revised 2023 Finance Act

The federal government wants to take half of the profit that banks make from exchanging foreign money in 2023.

This is a new change that the President has sent to the National Assembly for approval.

The money from this tax will be used for projects called “Renewed Hope”, and will help with things like building roads, schools, and hospitals.

The document from Newslodge says that the tax, also called “windfall tax,” will be collected by the Federal Inland Revenue Service (FIRS).

It says, “There will be a 50% tax on the profits from all money exchanges by banks in 2023.”

“The FIRS will check the banks’ profits, collect the tax, and make sure it is paid according to the rules of the Federal Inland Revenue Service Act 2007.”

If the banks do not pay this tax, they will have to pay an extra 10% of what they owe, plus interest. The key officials from the banks could even go to jail.

Backstory

• Newslodge earlier reported that President Bola Tinubu wants to change some rules to tax the profit banks make from foreign money exchanges in 2023.
• The President said the money from this tax would help build infrastructure, improve schools and hospitals, and support public welfare.
• Big banks in Nigeria made N3.37 trillion from revaluing foreign money in 2023 and the first part of 2024, according to Nairalytics.

What you should know

• The Central Bank of Nigeria (CBN) announced in June that it would bring together different exchange rates to close the gap between official and unofficial rates.
• These changes caused big losses for businesses in industries and consumer goods, but the banking sector made a lot of profit. By the end of December 2023, the value of naira dropped a lot.
• The money from these changes now makes up about 20% of federal allocations, up from 1.32% earlier in 2023, while businesses in manufacturing and industry experienced big losses.