Plans by the Federal Government to impose taxes on foreign exchange (FX) gains on banks may deter foreign investors and negatively impact Nigeria’s investment landscape, the Chartered Institute of Bankers of Nigeria (CIBN), has warned.
The institute argued that the action could discourage foreign investors, especially at a time when banks are required to raise capital where they may be looking towards attracting foreign investors.
President/Chairman of Council, CIBN, Prof. Pius Olanrewaju, in a letter to the Chairman, Senate Committee on Finance, Mohammed Musa, on ‘Imposition of Income Tax on Foreign Exchange Gains of Banks’, saying the tax could lead to reduced investment, decreased liquidity and increased costs as well as negatively impact economic growth.
According to him, the tax could lead to reduced market participation, exacerbating currency fluctuations and potentially destabilise the economy.
Noting that the CIBN recognises the need for improving government revenue which, he said, was one of the reasons for proposing tax levy on foreign exchange gains of banks, Olanrewaju advocated for careful consideration and thorough analysis before imposing taxes on foreign exchange gains by banks.
He said the institute proposed stakeholders’ meeting comprising the Ministry of Finance, the Central Bank of Nigeria, the banks and other relevant stakeholders where all the parties would do a holistic review of the implications of the proposed tax on the industry.
The CIBN chief stressed that the proposed tax might not be the best way to address the foreign exchange position of banks at this time.
