Nigeria’s new tax policy targeting foreign exchange revaluation gains has led to a combined windfall tax liability of N172.3 billion for three major banks—Zenith Bank, Guaranty Trust Holding Company, and United Bank for Africa.
The Finance (Amendment) Act 2023 introduced a windfall tax on realized foreign exchange profits recorded by Money Deposit Banks between 2023 and 2025.
This tax, set at 70% of FX windfall gains, was passed by the National Assembly in July 2024 and signed into law in August.
It aims to capture excess earnings from currency fluctuations, affecting major banks like Zenith Bank, GTCO, and UBA.
According to their audited financial statements for the 2024 fiscal year, GTCO, Zenith Bank, and UBA reported windfall tax charges of N51.2 billion, N63.3 billion, and N57.9 billion, respectively.
The windfall tax is a major fiscal measure by the Nigerian government designed to capture the extraordinary gains banks made due to the Naira’s devaluation. This intervention underscores the government’s effort to generate revenue from FX revaluation profits while addressing macroeconomic imbalances.
In June 2023, the Central Bank of Nigeria eliminated multiple exchange rate windows and adopted a market-driven system, causing the official exchange rate to rise from approximately N460/$1 to over N700/$1.
This volatility allowed banks with large foreign currency holdings to record significant gains on their FX-denominated assets, both realized and unrealized.
Zenith Bank incurred a windfall tax charge of N63.3 billion for the 2023 fiscal year, despite posting a record pre-tax profit of N1.3 trillion. While the bank has yet to disclose a detailed breakdown of the tax, the implication is that a significant portion of its profit stemmed from FX-related gains during the Naira’s devaluation.
GTCO, the parent company of Guaranty Trust Bank and its subsidiaries, reported a windfall tax provision of N51.1 billion. This includes N23.7 billion for the 2023 financial year and an additional N27.4 billion, likely accrued in the current fiscal period.
According to the group, “In July 2024, the Nigerian government enacted the Windfall Tax Bill as an amendment to Section 29A of the Finance Act 2023, imposing tax on realized foreign exchange gains earned by the bank.”
GTCO recorded a pre-tax profit of N1.2 trillion, buoyed by strong FX gains and improved net interest income following monetary tightening by the Central Bank.
UBA’s financial statements indicate a windfall tax liability of N57.9 billion, with N24.8 billion allocated for FY 2023 and N33.1 billion for FY 2024. Despite reporting a pre-tax profit of N803 billion, the tax represents a substantial impact on the bank’s earnings.
In a detailed disclosure to investors, UBA explained:
“The Finance (Amendment) Act 2023 now imposes and charges a windfall levy on Money Deposit Banks in Nigeria. The 2023 fiscal year was marked by a major devaluation of the Naira… Banks that held FX assets in their books reported significant unrealized and realized FX gains upon translation and settlement of transactions in foreign currencies.”
