The Senate has approved President Bola Tinubu’s request to amend the Finance Act to impose a one-time windfall tax on banks’ foreign exchange profits in 2023.

This request was contained in a letter sent on Wednesday and read by Senate President, Godswill Akpabio.

A windfall tax is a higher tax levied by the government on sectors or businesses that have disproportionately benefited from favourable market conditions.

The President said the money would be part of the revenue used to fund the additional N6.2tn added to the 2024 budget.

The letter was presented as an Executive bill that read in part, “Furthermore, the proposed amendments to the Finance Act, 2023 are required to impose a one-time windfall tax on foreign gains realised by banks in their 22 financial statements to fund capital infrastructure development, education, and healthcare access as well as public welfare initiatives to give sound and solid foot to the Renewed Hope Agenda of Mr President C-in -C.

“Finally, I believe that all the proposals in this bill are laudable and will enhance the critical needs of the citizens of this country.”

The bill was given an expeditious treatment passing both the first and second readings.

The bill was then forwarded to the Senate Committee on Finance and asked to revert in one week.

On July 6, 2023, President Tinubu signed the Finance Act (Effective Date Variation) Order, 2023, which took effect on September 1, 2023.

He stated that the amendment would permit a one-time windfall tax on the foreign exchange gains banks realised in their 2023 financial year to fund capital infrastructure development, education, healthcare, and welfare initiatives.

On June 14, the Central Bank of Nigeria unified the multiple forex rate systems, merging all forex windows into the investors’ and exporters’ window.

This policy led to a significant depreciation of the local currency and an increase in the dollar rate.

On September 12, 2023, the CBN instructed banks to stop using gains from the revaluation of the naira to pay dividends or finance operations.

The CBN’s review of the forex regime change indicated that banks could profit from the policy due to its potential to significantly increase the naira value of their foreign currency assets and liabilities.