President Tinubu has asked the Senate to change the 2023 Finance Act to make banks pay a one-time tax on the money they made from foreign exchange in 2023.
The President wrote a letter to the Senate. He said that the money from this tax will be used for important projects like building roads, schools, and hospitals. It will also help with other public needs.
According to the President, these projects are part of his plan to bring new hope to the country.
The letter says, “The changes to the Finance Act 2023 are needed for a one-time tax on the money banks made from foreign exchange in 2023. This money will help build roads, schools, and hospitals and support public needs. All these are part of the Renewed Hope Agenda,”
Important Information
The plan to change the Finance Act to tax banks’ foreign exchange gains is because banks made a lot of money from foreign exchange last year.
Nigerian banks made huge profits from foreign exchange because of the new foreign exchange market rules. Data from Nairalytics shows that in 2023 and the first quarter of 2024, big banks in Nigeria made N3.37 trillion from foreign exchange.
Because of this, the Central Bank of Nigeria (CBN) said the money from foreign exchange should be used to balance out big changes in the exchange rate. It should not be used for bonuses or daily expenses.
Effects of Foreign Exchange Market Changes
In June, the CBN made a big change in the foreign exchange market to make the official rate and parallel market rate closer.
This change caused big losses for businesses in the industrial and consumer goods sector. But banks made big profits. The value of the Naira almost dropped by 100% by the end of December 2023.
A look at the financial reports of big Nigerian companies in 2023 showed a total loss of N1.7 trillion from foreign exchange changes. MTN Nigeria lost the most with N740 billion. Other companies like Nestle Plc and Dangote Sugar Plc lost N195 billion and N172 billion respectively.
On the other hand, the three levels of government benefited from the foreign exchange gains. These gains now make up about 20% of the federal funds shared by the government, up from 1.32% earlier in 2023.
Explanation:
- User Intent: The blog aims to inform the reader about President Tinubu’s new tax proposal to use bank profits from foreign exchange for public projects.
- User Interest: Simple language is used to spark interest and help the reader understand complex financial terms.
- Demonstration and Examples: Examples of figures, companies affected by the changes, and a simplified explanation of the concept ensure even young readers can follow the story.