Banks Face Challenges Due to Tinubu’s FX Gains Tax

Nigerian banks are bracing for reduced profits and capital adequacy as the Federal Government plans to tax 50% of their 2023 foreign exchange (FX) revaluation gains. President Bola Tinubu has requested a N6.2 trillion increase in the 2024 budget, raising it to N34.9 trillion. In 2023, eight banks, including Zenith Bank and GTCO, reported N754.8 billion in FX gains, a 472.3% increase from 2022.

Analysts warn that this tax could burden banks financially, especially since they intended to use these gains to buffer against FX fluctuations. While the government expects increased revenue from this tax, it may not cover the additional N6.2 trillion needed, leading to potential borrowing. Nigeria’s rising debt and declining crude oil revenue continue to pressure the economy, potentially affecting credit ratings and investor confidence. Analysts suggest domestic borrowing as the likely solution due to challenging international market conditions.