Wale Edun: Banks’ windfall profit important contribution to government’s revenue

Wale Edun, minister of finance and coordinating minister of the economy, says the banks’ windfall profit levy is an important contribution to the government’s revenue.

Edun spoke on Monday when he appeared before the national assembly to defend the federal government’s proposed one-off levy on banks’ foreign exchange (FX) gains.

President Bola Tinubu, on July 17, asked the national assembly to amend the 2023 Finance Act to impose the windfall tax on banks.

Appearing before the national assembly joint committee on finance along with Zach Adedeji, chairman of Federal Inland Revenue (FIRS), Edun said it is normal for the government to impose such a levy on windfall arising from changes in government policy and ensure that the profit is redistributed to the people.

The minister told the panel that there is nothing new in imposing such levies on windfall all over the world.

He also said the local banks profited so much from FX transactions not by their own ingenuity but as a result of changes in government policy.

“The bank windfall profit levy, although small, still constitutes an important contribution to government finances at a time when revenues have substantially increased despite minimising taxes,” Edun said.

Edun said the monies to be taken from the banks should not be considered as tax but levies, dismissing the view that the levies would be passed on to customers.

“This is an important opportunity given to all stakeholders. All over the world, it is common that the society takes a share of such profit,” he added.

“This is an important contribution to the finances of the government at this time, however, it is important to say that has been robust without raising taxes, there is a minimisation of taxes, and government revenue has increased substantially.

“Broadly speaking, it is a levy on realised gains on foreign exchange within the banking sector. 

“It is a pity that the Central Bank of Nigeria (CBN) and the Bankers’ Committee are not at this crucial discussion to fine-tune the proposed legislation.”

Edun also urged the lawmakers to give the banks the benefit of the doubt, allaying fears regarding possible cases of underreporting by banks.

‘WINDFALL PROFITS WILL HELP BALANCE ECONOMIC INEQUALITIES ‘

On his part, Adedeji said the banks’ windfall profits levy would help in balancing the economic inequality in the country, especially after the government introduced its harmonisation policy of the FX market.

the FIRS boss said the manufacturing sector has made a N1.7 trillion loss due to the FX and based on that, the agency cannot tax them.

“It’s not that we are going after the profit but recovering the losses incurred by the activities as a result of their own ineptitude, bringing a policy to correct the policy decision,” he said.

“Everybody realised that it is not their money, money earned in the normal course of your business.”

In his response, Sani Musa, chairman of the joint committee, said the intent behind the levy is to ensure that banks contribute their fair share to national revenue, especially in light of the substantial gains made from FX.

“The proposed finance (Amendment) Bill, 2023, is a pivotal step in our nation’s economic transformation journey,” Musa said.

“This bill seeks to impose a 50% levy on the realised profits from all foreign exchange transactions of banks within the 2023 financial year.

“The intent behind this levy is to ensure that banks contribute their fair share to national revenue, especially in light of the substantial gains made from foreign exchange activities. The levy does not affect Nigerians, it is not on Nigerians, but the huge profits on forex that the banks made.

“His Excellency President Bola Ahmed Tinubu has initiated numerous economic reforms aimed at propelling Nigeria towards a future of advancement and prosperity.

“This bill is one of the bold decisions undertaken to provide the government with the necessary funding to address our country’s multifaceted infrastructure deficit. The success of these reforms hinges on our collective support and active participation.

“Our discussions today will cover the detailed provisions of the bill, including the Federal Inland Revenue Service’s role in assessing, collecting, and enforcing the levy, the mechanisms for deferred payment agreements, and the penalties for non-compliance.”

Musa said the matter needs to be addressed while welcoming suggestions on how to ensure the smooth implementation of the levy.