On Tuesday, the Senate passed the amendment bill of the 2023 Finance Act, raising the windfall levy on banks’ foreign exchange revaluation gains from 50% to 70%. This move, proposed by President Tinubu, is designed to generate additional revenue for the nation. The Chairman of the Senate Committee on Finance, Sen. Sani Musa, presented the committee’s report before the bill was passed. The amendment also adjusts the commencement date of the act to align with the new foreign exchange policy implemented by the Central Bank of Nigeria (CBN) on June 14, 2023.
Additionally, the Senate extended the timeline for applying the windfall levy to all profits from foreign exchange transactions from the start of the new forex policy until the 2025 financial year. This decision aims to ensure that the financial benefits from foreign exchange gains are adequately captured and utilized for national development.
The Senate also approved an amendment to the 2024 appropriation act, adding N6.2 trillion to the budget for recurrent expenditure. This includes funding for the new N70,000 minimum wage and infrastructure projects under the Renewed Hope Agenda. President Tinubu’s administration has been focused on implementing reforms to stabilize Nigeria’s economy, which has been grappling with high debt, unemployment, and low oil output.
One of the most contentious aspects of the new reforms is the one-time windfall tax on banks’ foreign exchange profits. This tax, which targets the revaluation gains from 2023, has sparked debate among financial experts and legal professionals. KPMG Nigeria criticized the retroactive nature of the tax, warning that it could lead to legal disputes and undermine investor confidence. PwC Nigeria echoed these concerns, suggesting that the unpredictability of such taxes could deter future investments.
Despite these criticisms, the Senate moved forward with the amendments, emphasizing the need for additional revenue to fund critical infrastructure and social welfare initiatives. The Finance Act amendment specifies that banks failing to remit the required tax will face penalties, including a 10% fine and interest at the CBN’s minimum discount rate. Principal officials of non-compliant banks may also face imprisonment.
In parallel with these legislative changes, President Tinubu has unveiled a comprehensive economic management plan to address Nigeria’s immediate and long-term financial challenges. Central to this plan is the establishment of the Presidential Economic Coordination Council (PECC), chaired by Tinubu himself. This council includes 12 cabinet ministers, the central bank governor, and prominent business leaders such as Aliko Dangote and Tony Elumelu.
To tackle urgent economic issues, Tinubu has also formed the Economic Management Team Emergency Taskforce (EET), led by Finance Minister Wale Edun. This taskforce, which includes top economists and state governors, is tasked with developing and implementing a six-month emergency economic plan. The EET’s efforts will complement the work of the existing Economic Management Team, which will focus on long-term strategies once the emergency plan is in place.
These reforms and management structures are part of a broader effort to stabilize Nigeria’s economy, which has been hit hard by the removal of petrol subsidies and the devaluation of the naira. While these measures have led to significant price increases and a cost-of-living crisis, the government believes that they are necessary steps towards sustainable economic growth.
In another significant development, the Senate has passed the Nigeria Insurance Industry Reform Bill for its second reading. This bill aims to modernize and boost the insurance sector, which has struggled with low penetration and outdated regulations. The proposed reforms include consolidating existing insurance laws into a single framework and enhancing risk-based supervision to ensure the sector’s growth and stability.
Senator Mukhail Adetokunbo Abiru, who sponsored the bill, highlighted the potential for exponential growth in Nigeria’s insurance industry, given the country’s young population and growing GDP. The bill’s provisions were widely praised by senators, who believe that the reforms will revolutionize the insurance sector and contribute to Nigeria’s economic development.
These legislative actions reflect a concerted effort by Nigeria’s government to address the country’s economic challenges through comprehensive reforms and strategic planning. As the nation navigates these changes, the focus remains on creating a stable and prosperous economic environment for all Nigerians.
