Nigerian President Bola Tinubu proposes a one-time 50% tax on banks’ windfall profits from massive currency gains post-naira devaluation.
Similar to European efforts, the move aims to bolster public finances amid a cost-of-living crisis and follows Europe’s windfall taxes on banks benefiting from high interest rates.
Nigeria’s central bank had previously instructed lenders to retain hefty gains from foreign exchange rule changes as a buffer against losses.
The announcement led to a 1.3% drop in the NGX Banking Index, with significant declines for FBN Holdings Plc (3.2%) and Zenith Bank Plc (2.5%).
Lawmakers are likely to support the tax, alongside a request to increase spending by 6.2 trillion naira ($3.8 billion), with a vote expected soon.
Several European countries, including Italy, Hungary, and Slovakia, have implemented special taxes on banks to address profits gained from inflation and rising interest rates.
The devaluation boosted bank profits significantly; Guaranty Trust Bank’s profits tripled, and Access Holdings Plc’s net income quadrupled in 2023 due to revaluation gains.