The Nigerian Senate has passed amendments to the 2023 Finance Act, notably increasing the windfall levy on banks’ foreign exchange revaluation gains from 50% to 70%.
The decision follows deliberations led by Sen. Sani Musa, Chairman of the Senate Committee on Finance, who presented the committee’s findings before the bill was approved.
A pivotal amendment included adjusting the commencement date of the amended act. Originally slated for January 1, 2023, the commencement will now align with the implementation of the new foreign exchange policy. This alteration was prompted by objections raised by Sen. Aminu Waziri Tambuwal regarding the retroactive nature of the initial proposal.
Additionally, senators extended the timeline for applying the windfall levy, stipulating that it will now cover all profits from foreign exchange transactions starting from the introduction of the new forex policy up to the 2025 financial year, as outlined in clause 2 of the amendment.
The new foreign exchange policy, introduced by the Central Bank of Nigeria on June 14, 2023, unified all segments of the foreign exchange market, setting the stage for these legislative adjustments.
In tandem with these changes, the Senate also passed amendments to the 2024 appropriation act, approving an additional N6.2 trillion to the budget. This supplementary allocation will primarily fund recurrent expenditures, including the implementation of the new N70,000 minimum wage and various infrastructure projects across the nation.
President Bola Tinubu initially proposed these amendments to address concerns related to banks’ foreign exchange revaluation profits in the 2023 financial year. The revised bill outlines penalties for non-compliance, including a 10% penalty and interest at the Central Bank of Nigeria’s minimum discount rate, alongside potential imprisonment for key officials if tax obligations are not met.
The proposal has sparked extensive debate, with prominent tax and advisory firms such as KPMG Nigeria and PwC Nigeria questioning its timing and potential implications. Criticism has focused on the retroactive application of taxes, with concerns raised about its impact on investment confidence and legal compliance within Nigeria’s tax framework.
Legal expert Dr. Olisa Agbakoba has criticized the amendment as ill-conceived, warning that any financial burden imposed on banks could ultimately be transferred to their customers.
As the amended Finance Act moves forward, its implementation and broader implications for Nigeria’s fiscal policy and economic landscape will continue to be closely monitored both domestically and internationally.
