UBA, Zenith, GTCO incur N172bn in windfall tax

Zenith Bank, Guaranty Trust Holding Company (GTCO), and United Bank for Africa (UBA) have collectively incurred windfall tax liabilities totalling N172.3 billion.

A windfall tax is a higher tax imposed by the government on sectors or businesses that have benefitted from favourable market conditions

On July 6, 2023, President Bola Tinubu signed the Finance Act (Effective Date Variation) Order, 2023, which took effect September 1, 2023.

However, more than a week later, Tinubu asked the national assembly to amend the Finance Act to impose a 50 percent windfall tax on banks’ foreign exchange (FX) gains.

The lawmakers increased the windfall tax to 70 percent — from the proposed 50 percent — and passed the amended Finance Act on July 23.

According to the amended Act, “a levy of 70 percent on the realised profits from all FX transactions of banks within the 2023 to 2025 financial years would be levied and paid to the benefit of the federal government”.

‘GTCO PAID N51.2 BILLION IN WINDFALL TAX’

In the audited annual financial statements for 2024, released on Friday, GTCO, Zenith Bank, and UBA reported windfall tax of N51.2 billion, N63.3 billion, and N57.9 billion, respectively.

Zenith Bank recorded a windfall tax of N63.3 billion for the 2024 fiscal year, while reporting zero for 2023 period.

GTCO, the parent company of Guaranty Trust Bank (GTB), reported that it incurred a windfall tax of N51.1 billion between 2023 (which accounted for N23.7 billion) and 2024.

“In July 2024, the Nigerian government enacted the Windfall Tax Bill as an amendment to Section 29A of the Finance Act 2023, imposing tax on realized foreign exchange gains earned by the bank,” GTCO said.

“In accordance with this legislation, the Federal Inland Revenue Service (FIRS) has assessed the Bank’s liability for the windfall tax, advising a total provision of N51bn, which includes N23.7bn for the year 2023.

“The bank has recognised this provision in its financial statements, reflecting its commitment to comply with tax obligations and contribute to national revenue.”

In its financial statement, UBA recorded a windfall tax liability of N57.9 billion, broken down into N24.8 billion for 2023 and N33.1 billion for 2024.

In a detailed disclosure to investors, UBA said the 2023 fiscal year was characterised by a significant devaluation of the naira, which led banks holding FX assets to record substantial realised and unrealised foreign exchange gains from currency translation and transaction settlements.

“The Finance (Amendment) Act 2023 now imposes and charges a windfall levy on Money Deposit Banks in Nigeria. The 2023 fiscal year was marked by a major devaluation of the Naira… Banks that held FX assets in their books reported significant unrealized and realized FX gains upon translation and settlement of transactions in foreign currencies upon translation to Naira and realized FX gains upon disposal of assets (e.g., cash, stocks, bonds etc.) or settlement of transactions in foreign currencies,” UBA said.

“As per the Act Section 29 A of the law, there shall be levied and paid to the benefit of the federal government of Nigeria a levy 70% on the realised profits from all foreign exchange transactions of banks within the 2023 to 2025 financial years”

UBA added that the liability followed a series of reconciliation meetings with FIRS, during which provisional estimates were agreed upon.