The recent windfall experienced by some banks, particularly, the tier one lenders and those with off-shore subsidiaries, listed on the NGX, through foreign exchange revaluation have become subject of taxation by the federal government to fund infrastructure and some campaign promises.
Tinubu is seeking for over N6 trillion supplementary budget to fund the projects, which the government feels are critical for the development of the country.
Specifically, the leading lenders reported substantial FX revaluation gains following the unification of the foreign exchange market, a development that equally led to significant losses by businesses in the industrial and consumer goods sector of the economy.
Indeed, the banks on the exchange were believed to have recorded over N3 trillion revaluation gains in their 2023 financials as well as their first quarter 2024 results.
However, president Bola Tinubu is seeking for the implementation of policy through proposed amendment to the 2023 Finance Act, for which he has asked the Senate to amend it.
The President in a letter to the Senate explained that the funds generated from this tax would be used to support capital infrastructure development, education, healthcare access, and public welfare initiatives.
According to the President, these projects are essential components of the administration’s renewed hope agenda.
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The letter reads, “Furthermore, the proposed amendments to the Finance Acts 2023 are required to a one-time windfall tax on the foreign exchange gains realised by banks in their 2023 financial statements to fund capital infrastructure development, education, and healthcare as well as welfare initiatives all which are components of the Renewed Hope Agenda,”
As a result of the windfall, the Central Bank of Nigeria (CBN) had last year advised the lenders to use it as a buffer to mitigate significant movements in the FX rate and should not be allocated for paying dividends or operating expenses.
Some leading Nigerian companies, in 2023 experienced cumulative foreign exchange revaluation losses of N1.7 trillion with MTN Nigeria as the biggest casualty at N740 billion.
The telecommunications giant was followed by consumer goods majors such as Nestle Plc and Dangote Sugar Plc with N195 billion and N172 billion FX losses respectively.
Conversely, the three tiers of government have been benefitting from the FX revaluation gains with much naira coming into the national purse that have continued to be shared on monthly basis.