FG, financial experts differ on Windfall Tax

Financial experts have raised concerns about the Federal Government’s proposed windfall tax on banks’ 2023 foreign exchange gains and its potential impact on the economy.

They expressed their divergent views during the hybrid fourth edition of the Mid-Year Review of the 2024 Economic Outlook, organised by the Chartered Institute of Bankers of Nigeria (CIBN) Centre for Financial Studies in Lagos.

Dr ‘Biodun Adedipe, Chief Consultant at B. Adedipe Associates Ltd., while responding to a participant’s question about the policy’s implications, said that the 70 per cent windfall tax imposed by the National Assembly could be counterproductive.

Adedipe said that the tax could also hinder the banking industry’s ability to support economic growth.

He emphasised the importance of the banking industry’s resilience in weathering past economic crises and urged the government to reconsider the policy.

The event, held in collaboration with B. Adedipe Associates Ltd. in Lagos, aimed to evaluate Nigeria’s economic performance in the first half of the year and provide an outlook for the second half.

Supreme News reports that President Bola Tinubu had proposed a 50 per cent windfall tax on banks’ foreign exchange profits in 2023, requesting the National Assembly (NASS) amend the Finance Act.

However, both chambers of NASS passed the amendment on July 23, increasing the windfall tax to 70 per cent.

The financial consultant explained that Nigerian banks typically withstand economic challenges due to their investment in research and strategic planning.

He highlighted the banking sector’s consistent growth despite historical economic crises in Nigeria and advocated against penalising banks for their proactive measures.

The economist stated that, if given the chance, he would advise the Federal Government’s economic team and the Chairman of the Federal Inland Revenue Service against the windfall tax.

Earlier, Dr Tope Fasua, Special Adviser to the President on Economic Affairs, said that there had been progress in various sectors such as construction, oil and gas, agriculture, export, and technology.

Fasua encouraged banks to adjust their business models to promote inclusive economic growth beyond their sector.

He cited new policies like the minimum wage increase and local government autonomy as indicators of potential economic growth.

He urged citizens to take advantage of new opportunities in local production, export and agriculture.

Prof. Pius Olanrewaju, Chairman of the Council, Chartered Institute of Bankers of Nigeria (CIBN), highlighted the significant macroeconomic developments in the first half of the year.

Olanrewaju listed the developments to include high inflation, high interest rates, slow GDP growth, and low foreign direct investment inflows.

According to him, the exchange rate depreciated and inflation surged to a three-decade high of 34.19 per cent, while GDP grew by 2.98 per cent year-on-year in first quarter of the year.

He highlighted growth in the services sector, agriculture sector recovery, and the banking sector’s strength, supported by the Central Bank of Nigeria’s recapitalisation directive.

Panelists at the event discussed sector-specific challenges and opportunities for the financial sector to thrive in the second half of the year.