Agbakoba critiques proposed windfall tax on Banks’ forex gains

In a recent interview, Dr. Olisa Agbakoba, Senior Partner and Head of the Alternative Dispute Resolution (ADR) and Arbitration practice group at Olisa Agbakoba Legal (OAL), shared his insights on the federal government’s plan to implement a 50% windfall tax on banks’ profits from foreign exchange revaluation under the proposed amended Finance Act.

Dr. Agbakoba expressed deep concerns about the potential ramifications of such legislation on both bank operations and their customers in Nigeria.

He highlighted the crucial role of the financial sector as the lifeline of the Nigerian economy and warned that policies detrimental to this sector could have dire consequences.

“The proposed amendment to the Finance Act is completely ill-thought-out legislation,” Dr. Agbakoba stated firmly, emphasizing that penalizing financial transactions through legislation could undermine investor confidence and economic stability.

He cited legal precedents and constitutional limits on legislative powers as reasons why such measures might face challenges.

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Regarding the impact on bank customers, Dr. Agbakoba predicted that the burden of the windfall tax would likely be passed on to consumers. He drew parallels with similar tax measures internationally, noting the negative reactions they elicited from affected industries.

“If banks incur a windfall tax of 50% on their profits, they will seek ways to recover these costs, potentially leading to higher costs for banking services and contributing to inflationary pressures,” he explained.

Dr. Agbakoba urged the government to reconsider its approach to revenue generation, suggesting alternative strategies such as reforming the oil and gas sector and addressing inefficiencies in revenue collection.

Responding to the government’s assertion that the windfall tax would fund infrastructure development, Dr. Agbakoba challenged the lack of specific details and questioned the overall economic benefit.

“It’s not enough to say we’ll get money; we must consider how that money will impact the economy,” he asserted, raising concerns about inflationary risks and increased consumer costs.

In conclusion, Dr. Agbakoba called for a more holistic approach to economic policy-making, stressing the need for legislation that fosters sustainable economic growth and benefits all Nigerians.