Early trading on the Nigerian Exchange has witnessed a noticeable downturn in bank stocks, attributed to investor response to the proposed 50% tax on foreign exchange gains.
By 12:30 PM, trading data indicated significant declines: FBN Holding’s shares fell by 3.16%, GTCO saw a decrease of 0.33%, FCMB experienced a 3.25% drop, and UBA recorded a decline of 1.89%.
Brokers’ reports highlight heightened sell pressure on banking stocks, with substantial turnover volumes observed within just two and a half hours of trading.
In a proposed amendment to the 2023 Finance Act, the Federal Government is making efforts to apply a one-time windfall tax of 50% on the realized foreign exchange gains recorded by banks in the 2023 financial year.
According to a letter sent by the Tinubu to the Senate, the 50% tax would be used to fund the N6.2 trillion additions to the 2024 appropriation budget.
It was noted that the tax would be used to fund “capital infrastructure development, education, and healthcare as well as welfare initiatives all of which are components of the Renewed Hope Agenda.”
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In the 2023 financial year, major Nigerian banks recorded FX gains amounting to about N3.37 trillion. However, there will need to be a distinction between the realized and unrealized gains.
After the devaluation of the Naira in 2023, banks in Nigeria recorded significant earnings from the revaluation of their FX-denominated assets.
However, for other private sector players, it was a significant dent to their books, as companies like MTN Nigeria suffered a N740 billion FX revaluation loss.
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