FG’S plan to tax foreign exchange gains of banks raises dust

REACTIONS have continued to trail the Federal Government’s move to tap into foreign exchange ( FX) gains recorded by banks in the 2023 financial year, with investment bankers expressing divergent views on the issue. While some operators said the decision was capable of destroying the economy, because investors had taken positions based on the numbers before the announcement, others argued that the gains were earned profits and should be taxed like every other earnings.

A stockbroker, Tajudeen Olayinka, said the whole world would see the country as un- investable if the decision is eventually implemented.

According to him, this is because decisions based on the profits had been taken by all categories of investors, analysts and other stakeholders. The profits, he said, informed decisions on buy or sell recommendations on all securities issued by these banks.

He said another consideration is the fact that the business of a bank is centred on liability generation and asset creation. He wondered on what would happen to the liabilities of the banks that were subjected to repricing by all their customers as a result of currency depreciation or changes in economic conditions. Olayinka described the move as an inappropriate decision by the government, which could also be coined as ‘ backward hustle’.

He pointed out that it could affect so many investment decisions now and in the future, urging the government to rescind the decision. "It is a clear demonstration of incompetence by the current government. They may end up destroying the economy if they continue this way," he said.

Vice President of Highcap Securities Limited, David Adonri, said the move would impact shareholders’ funds negatively when implemented.

He also stressed the need for shareholders to engage with the government to prevent the expropriation of their wealth.

However, Head Equity, Planet Capital, Dr Paul Uzum, argued that since the redistribution function of government mandates it to tax those who earn economic rent from the system and use the proceeds to support the vulnerable sector, the banks being the biggest beneficiaries of the FX sale by CBN in the eight years of Buhari’s administration should be taxed.

“It is absurd that in the years 2023 and 2024 when the real sector is recording heavy losses and is finding it hard to sell manufactured goods, with many folding up and exiting the country just as individual households are becoming poor, banks are dancing.