‘Excessively burdensome, ill-timed,’ Bank directors reject windfall tax

The Bank Directors Association of Nigeria (BDAN) has kicked against the recently signed windfall tax introduced by the Federal Government.

The association described it as “excessively burdensome and ill-timed”.

In a recent statement by its chairman, Mustapha Chike-Obi, BDAN warned that a high tax rate would stifle growth and innovation within the banking industry.

Chike-Obi is also the chairman of Fidelity Bank Plc.

This, according to the association, will ultimately affect the quality of financial services available to customers and the broader economy.

The directors stressed the need for greater consultation and dialogue between the government and stakeholders in the banking sector before enacting such significant changes.

The statement read: “We, the Bank Directors Association of Nigeria (LTD/GTE) wish to formally address the recent imposition of a 70 percent levy on the profits realised from foreign exchange transactions by banks for the financial years 2023 to 2025.

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“We acknowledge and respect the intentions of the government in implementing this decision; however, we feel it is essential to express our concerns regarding the magnitude of the levy, its timing, and the ambiguities surrounding its implementation.

“While the imposition of this windfall tax appears to be a response to the current economic climate, we suggest that a 70 percent 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 before 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.

“A primary concern lies in the ambiguities of the language in this amendment which leave 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 (NITDL), etc.”

The BDAN also asked for clarifications 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,” the statement added.

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