In an unprecedented move that reeks of desperation, President Bola Ahmed Tinubu, on Wednesday, July 17, 2024, through a letter,
requested the Senate to approve the imposition of tax on the gains made by banks owing to the Naira floatation requested the Senate to approve the imposition of tax on the gains made by banks owing to the Naira floatation policy of the Central Bank of Nigeria .
According to Investopedia, “a windfall tax is a tax levied by governments against certain industries when economic conditions allow those industries to experience significantly above-average profits. Windfall taxes are primarily levied on companies in the targeted industry that has benefited the most from the economic windfall, most often commodity-based businesses.
It must be stated here, for clarity, that the so-called windfall profit by banks arose due to the failure of the Naira floatation policy of the CBN put in place mid-June 2023. Among other objectives, the policy was intended to unify exchange rates in the foreign exchange market. Therefore, the immediate import of the windfall tax is a direct punishment for many deposit money banks for effectively playing their transmission mechanism role. This is true because their huge profit made on the backdrop of the collapsing naira was just an outcome of the CBN policy.
There is also the issue of fairness from the perspective of capital owners , given that the CBN already barred access to 2023 FX earnings via dividend payments. And now the Federal Government in cahoots with the apex bank has unilaterally empowered itself to appropriate 70 per cent of the same profit.
Rather than resorting to taxing the DMBs in outright desperation, the Federal Government should urgently consider ‘monetising’ so many of its ‘solid’ assets lying fallow across the country. This is why the job of the Bureau of Public Enterprises is properly carved out for it at this point in time. Now, therefore, is the most auspicious time to sell such public assets like the four publicly-owned refineries that have for years been moribund in Port-Harcourt, Warri and Kaduna.
requested the Senate to approve the imposition of tax on the gains made by banks owing to the Naira floatation
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