Otedola supports 70% windfall tax on banking forex profits as they spend $500m on private jets

BILLIONAIRE businessman Femi Otedola has thrown his weight behind federal government proposals to introduce a 70% windfall tax on the foreign exchange gains of commercial banks to help fund Nigeria's N6.2tn ($3.73bn) supplementary budget.

Nigeria is a mono-economy, heavily dependent on crude oil export receipts to fund its budget and with both output and prices down, the amount of revenue coming into the treasury is below projections. With the country in the middle of a cost-of-living crisis, the government has also had to introduce emergency measures to ameliorate the effects of inflation, which is running at over 30%.

To help raise funds for this supplementary budget, the finance ministry has proposed a windfall tax on the banks and Mr Otedola, who is the chairman of banking group FBN Holdings, said he supports the measure. He slammed the Nigerian banking sector for its $50m estimated bill on maintaining private jets and an even higher bill on the purchase of private jets.

In July, Nigeria's senate amended the Finance Act to enable it levy a 70% windfall tax on banks’ foreign exchange profits. At the time, President Bola Tinubu said the money would be part of the revenue used to fund the N6.2tn supplementary budget.

Mr Otedola said:“I write to express my strong support for the implementation of a windfall tax in Nigeria and to highlight the critical role this measure plays in fostering a fairer and more equitable economic environment. This endorsement aligns with the ongoing efforts to reform the Nigerian banking sector, aimed at enhancing economic stability and integrity within our financial institutions.

"Windfall taxes are levies on companies or individuals who receive substantial, unexpected profits due to circumstances beyond their usual control or investment. Taxing these extraordinary gains ensures a fairer distribution of wealth, allowing those who benefit disproportionately to contribute more significantly to the broader societal good.”

He added that the revenue generated from windfall taxes could be channelled into essential public services, such as healthcare, education and infrastructure, benefiting all citizens and helping to reduce social inequalities. Of late, the consolidation of various foreign exchange rate systems into a single investors and exporters window led to the depreciation of the Nigerian naira and substantial increases in the value of bank assets denominated in US dollars.

Mr Otedola, who is also the chairman of Geregu Power, pointed out that the financial statements of manufacturing, telecoms, and small medium enterprises indicated that many of them may not be able to pay corporate tax for at least the next two years due to their negative equity. He added that it has therefore, become essential for the government to step in and provide support to those entities.

“Nigerian banks are spending an estimated $50m annually just on maintaining private jets, with over $500m gone into purchasing nine private jets by four banks. This level of extravagance significantly erodes public trust in our financial institutions and diverts crucial resources away from vital areas such as operational efficiency, technological innovation, and customer service,” Mr Otedola added.

He called on the banks to regain the trust of their customers by realigning their financial priorities and invest in areas that directly improve customer services and enhance technological infrastructure. Mr Otedola also commended the recent recapitalisation initiative in the banking sector, which he said strengthened the industry.