The Bank Directors Association of Nigeria (BDAN) has voiced strong opposition to the recent imposition of a 70% tax on banks’ foreign exchange gains, labeling it as “excessively burdensome and ill-timed.”
The association has urged the National Assembly to revisit the amendment to the Finance Act 2023 and engage in a constructive dialogue with banking sector stakeholders.
In a statement signed by the Chairman of BDAN, Mustafa Chike-Obi, the association highlighted several concerns about the newly imposed levy, which affects banks’ foreign exchange profits for the financial years 2023 to 2025.
The statement emphasized the potential negative impact of the tax on the banking sector and the broader economy.
Concerns Over the Levy’s Magnitude and Timing
BDAN’s statement reads, “We, the Bank Directors Association of Nigeria (BDAN), wish to formally address the recent imposition of a 70% levy on the profits realized from foreign exchange transactions by banks for the financial years 2023 to 2025.
We acknowledge and respect the government’s intentions 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.”
The association argues that while the government may view the windfall tax as a response to the current economic climate, a 70% tax rate is deemed “excessively burdensome and ill-timed.”
This is particularly concerning given the ongoing efforts by banks to recapitalize.
“Such a high levy has the potential to stifle growth and innovation within the banking sector, ultimately affecting the quality of services we provide for our customers and the broader economy,” the statement added.
Call for Open Dialogue and Clarification
BDAN also criticized the lack of consultation with stakeholders 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,” the association stated.
A significant concern for BDAN is the ambiguous language in the amendment, which leaves critical questions unanswered.
“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,” the statement said.
Nigerian Banks Among the Most Heavily Taxed
The association highlighted that Nigerian banks are already among the most heavily taxed in the world, citing the Asset Management Corporation of Nigeria (AMCON) levy imposed on the total assets of banks.
“We, therefore, recommend that a consolidation of all taxes and fees imposed on banks be thoroughly considered in the future,” BDAN advised.
The association further called for reassurance that future levies and fees would not be arbitrarily imposed.
“It would also be critical to reassure the banking community that future levies and fees will not be arbitrarily imposed,” the statement emphasized.
BDAN’s Appeal to the National Assembly
In light of these concerns, BDAN has appealed to the National Assembly to revise the 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,” the statement read.
Commendation for CBN’s Efforts
BDAN also took the opportunity to commend the Central Bank of Nigeria (CBN) for its recent efforts in stabilizing the banking sector.
“We remain committed to supporting and collaborating with regulators, government entities, and other stakeholders to find solutions that benefit all parties involved,” the association concluded.
