Daud Olatunji
Five major Nigerian banks including Wema Bank have recorded a combined foreign exchange (forex) gain of N67.89 billion in the first half of 2024.
This was revealed by the interim financial results submitted to the Nigerian Exchange Limited.
This represents a significant decline of approximately 67.89% from the N211.42 billion reported during the same period in 2023.
The financial institutions involved are FCMB Group, Ecobank Transnational Incorporated (ETI), Wema Bank, Sterling Financial Holding Company, and Jaiz Bank.
Each of these banks experienced varying degrees of forex gains, influenced by changes in the Central Bank of Nigeria’s (CBN) forex management policies and the naira’s exchange rate.
FCMB Group reported unrealized forex gains of N35.19 billion, down from N50.99 billion in the first half of 2023.
The bank attributed this decrease to the CBN’s liberalisation of the forex market, which saw the naira’s exchange rate against the US dollar fluctuate from N756.24/$ in June 2023 to N1,488.21/$ by June 2024.
Ecobank Transnational Incorporated (ETI) recorded N21.07 billion in forex translation gains, a substantial decrease from N156.28 billion reported in the previous year.
Wema Bank saw a notable increase in forex revaluation income, which rose to N6.20 billion in the first half of 2024 from N623.02 million in June 2023. However, this figure is still about half of the N13.60 billion earned in the entire year of 2023.
Sterling HoldCo reported forex revaluation gains of N5.34 billion, up from N3.63 billion in June 2023.
Jaiz Bank achieved a forex revaluation gain of N73.89 million, a significant improvement from a loss of N110.31 million in the previous year.
In contrast, FBN Holdings reported a forex revaluation loss of N80.85 billion, a notable improvement from the N192.57 billion loss incurred during the same period last year.
The federal government has proposed a one-time 50% windfall tax on the substantial forex gains reported by banks in 2023, aiming to raise additional revenue for critical infrastructure, education, and healthcare projects under President Bola Tinubu’s Renewed Hope Agenda.
The Senate has since increased this proposed tax to 70%, which will apply to forex gains from the naira’s devaluation through to the 2025 financial year.
FBN Holdings Chairman, Femi Otedola, has expressed support for the government’s move, viewing it as part of broader banking sector reforms aimed at enhancing economic stability and integrity.
Otedola criticized the opulence in the banking sector, particularly the ownership and maintenance of private jets, which he argues undermines public trust and diverts resources from essential areas.
Conversely, United Bank for Africa (UBA) Chairman, Tony Elumelu, expressed support for the windfall tax but emphasized the need for balanced policies that do not harm job creation and business growth.
Elumelu highlighted the importance of ensuring that extraordinary income is utilized to alleviate poverty and foster mutual prosperity.
The proposed windfall tax and its implications continue to be a topic of significant debate within Nigeria’s banking sector, with stakeholders assessing its potential impact on the financial landscape and broader economic conditions.
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