The stage may be set for a conflict among directors of banks, with the Bank Directors’ Association of Nigeria (BDAN) distancing itself from the position of Femi Otedola on the plan to tax foreign exchange (FX) profit of banks.
The Federal Government secured parliamentary approval to impose as much 70 per cent tax on the FX gains of banks last year under the guise of windfall tax, a plan that could pass as one of the most controversial in recent time.
The plan will see the FG harvesting close to N2 trillion from the gain. The proceeds are expected to be channelled to funding the supplementary budget, which provisions for the wage adjustment.
In a blog post on X, the Chairman of the association, Mustafa Chike-Obi, said the views of some bank chairmen on the issue do not align with the position of BDAN, which would be disclosed after its August 12 board meeting.
The Fidelity Bank Plc’s board chairman dismissed the position of Otedola, who is the Chairman of FBN Holdings Plc, saying it “does not represent the banking community”.
Otedola, in a widely-circulated opinion last week, took a swipe at bank chiefs for their insensitivity and extravagance, while he expressed his support for the Federal Government’s plan to scoop 70 per cent from FX profit.
Whereas the banks have seen the gains as part of their cushion for the tough economic challenges, some individuals think of it as part of the banks’ rent-seeking, behaviours that have supported their excessive waste and executive indulgence.
Otedola faulted bank CEOs for excessive prioritisation of excessive executive comfort at the expense of the development of the economy, disclosing that the banks spend $50 million yearly to maintain their private jets.
“With over $500 million gone into purchasing nine private jets by four banks, this level of extravagance significantly erodes public trust in our financial institutions and diverts crucial resources away from vital areas such as operational efficiency, technological innovation and customer service,” he said.
The billionaire investor expressed his “strong support for the implementation of a windfall tax in Nigeria and highlighted the critical role this measure plays in fostering a fairer and more equitable economic environment. This endorsement aligns with the ongoing efforts to reform the Nigerian banking sector, aimed at enhancing economic stability and integrity within our financial institutions.
“Windfall taxes are levies on companies or individuals who receive substantial, unexpected profits due to circumstances beyond their usual control or investment. Taxing these extraordinary gains ensures a fairer distribution of wealth, allowing those who benefit disproportionately to contribute more significantly to the broader societal good.”
Chike-Obi spoke the minds of the majority of CEOs and board members, who have been grumbling over the imposition, which the likes of Dr Muda Yusuf described as anti-investment.
Interestingly, the Fidelity Bank’s chairman was the pioneer chief executive officer of the Asset Management Corporation of Nigeria (AMCON), a financial behemoth set up with taxpayers’ money to absolve the toxic loans created by banks in the wake of the 2008 financial crisis. The loans, bought by AMCON to save the financial system from total collapse, were partly products of executive recklessness mentioned in Otedola’s article.
To date, Nigeria is indebted to bondholders, who bought into the debt instrument issued by the Central Bank of Nigeria (CBN) to fund AMCON. As at last year, it was disclosed the asset company had only recovered N1.6 trillion out of N4.66 trillion outstanding debt, which was met to deflate the debt.
Experts said the debt would ultimately be transferred to Nigeria. After the 2008/2009 bank bailout, the CBN subsequently poured money into banks to stabilise them. Even where the money is printed by the apex bank, some economists believe comes with a cost in the form high inflation rate, which Nigerians should be compensated for.
Perhaps, the windfall tax would be the first attempt at getting the bank to compensate Nigeria for the past historical support they have received from the common resources.
Chike-Obi’s comment is certainly not the last word on the issue as prominent bankers are waiting for an opportunity to make their positions known. (Guardian)
