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Nigerian President Bola Tinubu plans to slap a one-off 50 percent tax on windfall profits booked by banks on massive currency gains after the naira was devalued last year.
The move, detailed in a letter to lawmakers on Wednesday, comes as Nigeria tries to prop up public finances amid a cost-of-living crisis and follows similar efforts in Europe to tap bank earnings padded by high interest rates. Nigerian President Bola Tinubu plans to slap a one-off 50 percent tax on windfall profits booked by banks on massive currency gains after the naira was devalued last year.
The move, detailed in a letter to lawmakers on Wednesday, comes as Nigeria tries to prop up public finances amid a cost-of-living crisis and follows similar efforts in Europe to tap bank earnings padded by high interest rates. Nigeria’s central bank had already told lenders to hang on to hefty gains they booked after Tinubu loosened foreign exchange rules, triggering the naira’s slump, cautioning they should be held as a buffer against losses.
The naira is currently trading around 70 percent lower against the dollar prior to its level before the rules were relaxed in June 2023.
The 50 percent tax will be applied to the 2023 financial year and banks who fail to comply face fines. Nigerian bank stocks will start trading around 10 a.m. local time.
Lawmakers are expected to support the measure, alongside a request to increase spending by 6,2 trillion naira (US$3,8 billion), and could vote on Thursday or when they reconvene next week. Nigeria isn’t the only nation eying its lenders to support the public purse.
Several European countries including Italy, Hungary and Slovakia have announced special taxes on banks to skim what they consider unfair income on the back of rapid inflation and rising interest rates, which boosted bank profitability while hurting consumers. – Bloomberg
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