Seven major banks in Nigeria reported a combined tax payment of N392.53 billion for the first half of 2024, according to an analysis of their second-quarter financial results filed with the Nigeria Exchange.
These tax expenses encompass various levies, including corporate tax, minimum tax, information technology tax, tertiary education tax, and the Police Trust Fund levy. The Federal Inland Revenue Service specifies that the Company Income Tax stands at 30% of corporate profits, while the value-added tax (VAT) is a 7.5% consumption tax paid by consumers.
Guaranty Trust Holdings led the pack as the largest contributor, reporting an income tax expense of N110.90 billion for the first half of the year, a staggering 292.5% increase from N28.17 billion in the same period last year.
United Bank for Africa followed with a tax expense of N85.22 billion, up 235.5% from N25.41 billion in 2023. Access Bank’s tax expenses surged by 215.4% to N80.89 billion compared to N25.64 billion in H1 2023, while Zenith Bank reported a tax of N59.59 billion, a 90% increase from N31.32 billion last year.
Wema Bank recorded a tax expense of N3.97 billion, up 48.1% from N2.68 billion in the previous year, and Fidelity Bank reported N44.03 billion, reflecting a 232% increase from N13.23 billion in H1 2023. In contrast, First City Monument Bank saw a decrease in tax obligations, reporting N7.93 billion, down 29% from N11.30 billion in the same period last year.
Chief Economist and Managing Editor of Proshare, Teslim Shitta-Bey, emphasized the implications of increased taxes on shareholder dividends and retained earnings, which are crucial for future investments. He noted that while elevated taxes do not directly impact bank operations, they affect shareholder returns.
Shitta-Bey stated, “In analyzing bank profits, it’s important to understand that increased taxes won’t necessarily disrupt operations but will influence dividends for investors, who are the primary beneficiaries of significant profits.”
Another financial expert, Rotimi Fakeyejo, described the banks’ profits as “unusual” in contrast to other sectors facing losses from foreign exchange issues. He noted that the government is capitalizing on this to raise taxes on banks without reducing dividend payouts.
He explained, “Banks are experiencing significant growth this year compared to last, which is why the government decided to increase their tax burden.”
Olaid Baanu, a financial analyst, offered a more positive perspective, suggesting that the increased tax burden would not significantly harm banks, given their strong financial performance. He stated, “Banks have reported substantial profits, and I believe they can absorb the tax increases while maintaining strong performance.”
Additionally, the PUNCH reports that multinational companies, including Google, Netflix, and Facebook, contributed N2.55 trillion in taxes to the Federal Government during the first six months of this year.
