Tinubu Proposes 50% Tax on Banks' Excess Forex Earnings

The move, detailedin 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 bank stocks fell.

The West African nation’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. It cautioned they should be held as a buffer against losses.

The naira is currently trading around 70% lower against the dollar prior to its level before the rules were relaxed in June 2023.

The 50% tax will be applied to the 2023 financial year and banks who fail to comply face fines.

The move hoisted the income of banks holding dollar assets as they converted the proceeds to a weaker naira, while customers — mainly manufacturers holding dollar loans — reported huge losses from converting a weak naira to make interest payments.

The profit of Guaranty Trust Bank, the country’s biggest lender by market value, more than tripled in 2023 to N539.7 billion from N169.2 billion, driven by the revaluation gains. Net income for Access Holdings Plc, the top bank by assets quadrupled to N612.49 billion from 153.09 billion naira.

The move hit the NGX Banking Index, which was down 1.3% as of 12:26 p.m. in Lagos. The move was the biggest decline since July 9 and was paced by FBN Holdings Plc and Zenith Bank Plc, which retreated 3.2% and 2.5% respectively. In comparison, the NGX All Share Index fell 0.2%.

Lawmakers are expected to support the measure, alongside a request to increase spending by 6.2 trillion naira ($3.8 billion).