By 
Banking stocks on the Nigerian Exchange Limited (NGX) experienced declines on Friday following the Senate’s decision to retroactively amend the Finance Act 2023, imposing a one-time windfall tax on banks’ foreign exchange gains reported in their 2023 financial statements.
An analysis by THISDAY revealed that key banks, including Zenith Bank Plc, Guaranty Trust Holding Company Plc (GTCO), United Bank for Africa Plc (UBA), and FBN Holdings Plc, saw decreases in their stock prices on the NGX.
At the close of trading, Zenith Bank’s share price fell by 0.54% to N37.00, while GTCO dropped by 0.77% to N44.95 per share. UBA’s stock declined by 1.93% to N22.85 per share, and FBN Holdings saw a 3.29% decrease to N22.05 per share. However, FCMB Group experienced a 3.25% gain, placing it among the top five gainers on the exchange.
The decline in banking stocks impacted the NGX Banking Index, which fell by 0.75% to 843.99 basis points from the previous day’s 850.35 basis points.
THISDAY’s investigation showed that major banks in the country generated N3.37 trillion in foreign exchange revaluation gains in the 2023 fiscal year.
Analysts criticized the federal government’s move to retroactively amend the Finance Act 2023, arguing that the timing could undermine investor confidence and negatively affect Nigeria’s investment climate.
Investment Banker and Stockbroker, Mr. Tajudeen Olayinka, described the amendment as “madness of accumulated incompetence.” He explained that decisions by investors, analysts, and stakeholders were based on existing laws and international accounting standards. Olayinka warned that such retroactive changes could destabilize the banking sector and harm the economy.
Mr. Tunde Awolola, Managing Director of Parthian Securities Limited, highlighted the potential negative impact on Nigeria’s global financial standing. Awolola questioned the justification for the tax and warned that it could affect the country’s global ratings and deter foreign investors. He also pointed out the inconsistency in taxing banks for windfall profits without providing support for companies that incurred losses due to the same policy changes.
Another analyst, who preferred to remain anonymous, acknowledged the government’s fiscal challenges but criticized the bill’s approach and timing. He argued that targeting a specific industry rather than a specific activity violated the principle of fairness in taxation. He also noted that most banks are currently trying to attract investors, and the bill could hinder these efforts.
Mr. Emeka Madubuike, former president of the Association of Stockbroking Houses of Nigeria (ASHON), stressed that many banks have already paid dividends on their 2023 foreign exchange gains. He questioned how the government would implement the retroactive tax, given that financial decisions have already been made based on those gains.
Economist and Investment Specialist, Dr. Vincent Nwani, expressed skepticism about the legality of a retroactive tax. He warned that the amendment could send a negative signal to the financial market and deter foreign investors.
In conclusion, the Senate’s move to retroactively amend the Finance Act 2023 and impose a windfall tax on banks’ foreign exchange gains has led to a decline in banking stocks on the NGX and drawn criticism from analysts concerned about its impact on investor confidence and the broader economy.
Comments