Five banks pay N172bn taxes in six months

Five mid-sized banks’ income taxes in the first half (H1) of 2024 rose by 165.9 percent despite Nigeria’s tough operating environment, BusinessDay findings show.

According to the financial statement of FCMB Group, Wema Bank, Stanbic IBTC Holdings Plc, Sterling Financial Holdings Company Limited, and Ecobank Transnational Incorporated, income tax expenses rose to N172.1 billion in H1 from N64.7 billion in H1 of 2023.

Nigerian banks recorded a significant growth in profitability in H1 of 2024 with average profit growth in the sector in double digits.

The growth in profitability was mainly due to net interest income, non-interest income, and foreign exchange revaluation gains. Nigeria underwent currency exchange management in 2023, with the relative floating of the naira and a market-driven exchange system.

Companies are required by law to remit taxes to state, federal government agencies, among other agencies where they operate.

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Aside from paying the statutory rate of 30 percent of total profit as the company’s income tax, companies operating in Nigeria are meant to pay Tertiary Education Tax, National Information Technology Development Agency (NITDA) Tax, and Nigeria Police Trust Fund Levy.

The tertiary education tax is imposed on every Nigerian company at the rate of 2.5 per cent of the assessable profit for each year of assessment, while the Nigeria Police Trust Fund was meant to receive funds from a levy of 0.005 percent of the net profit of companies operating in Nigeria, which will be utilised for the training and welfare of personnel of the Nigeria Police Force.

A breakdown of the financial statement revealed that among the tier-two banks, Ecobank paid the highest tax amounting to N132.4 billion in H1 from N45.1 billion in the same period of last year, followed by Stanbic with N30.6 billion from N15.1 billion, and FCMB Group with N4.2 billion from N2.23 billion.

Others include Wema Bank with NN3.9 billion and N1.4 billion and Sterling Holdco with N1.08 billion and N778 million respectively.

The Senate recently passed a bill to amend the Finance Act 2023 and impose a one-time windfall tax on banks’ foreign exchange gains realised in their 2023 financial year.

But experts noted that the exercise is ill-timed, citing that it could undermine investor confidence and negatively impact Nigeria’s investment climate.

This new tax policy could impact their profitability and capital adequacy, especially if the banks had planned to use these foreign exchange gains as a counter-cyclical buffer against currency fluctuations, as directed by the Central Bank of Nigeria.

In the first six months of 2024, the banks surveyed reported a combined after-tax profit of N520.4 billion, which is a substantial increase from the N229.5 billion recorded in the same period of 2023.

Ecobank’ profit rose the highest to N311 billion from N105.2 billion, followed by Stanbic IBTC with N116.3 billion from N67.9 billion, FCMB with N59.4 billion from N35.4 billion, Wema Bank with N26.5 billion from N10.4 billion and Sterling Holdco with N16.2 billion from N10.6 billion.