Stanbic IBTC Plc, a Nigerian subsidiary of Standard Bank Group Ltd., expects the newly proposed windfall tax on foreign exchange gains to take only a small bite out of its profits. The tax, which imposes a 70% levy on forex gains, is predicted to consume less than 10% of the bank’s profit after tax, according to CEO Demola Sogunle.
Thank you for reading this post, don't forget to subscribe!During an investor call, Sogunle reassured stakeholders that the tax would not significantly affect the bank’s overall business. “For us at Stanbic IBTC, this windfall tax will account for less than 10% of our profit after tax. We don’t foresee any major impact,” Sogunle stated.
Stanbic IBTC also plans to launch a rights issue by year-end to meet the Central Bank of Nigeria’s new minimum capital requirements. Sogunle expressed optimism, citing the bank’s solid financial performance, regular dividend payouts, and strong backing from its parent company.
Strong Financial Performance in 2024
Stanbic IBTC’s financial results for the first half of 2024 show remarkable growth. In Q1 2024, the bank reported a pre-tax profit of N62.7 billion, up 73% from N36.3 billion in Q1 2023. Total income also surged by 71%, reaching N138.2 billion compared to N80.9 billion in the previous year.
The bank continued this positive trajectory in Q2 2024, posting a record pre-tax profit of N84.2 billion, an 80.4% increase. This marked the highest quarterly pre-tax profit in the company’s history, bringing the first half of 2024’s pre-tax profit to N147 billion—a significant jump from N82.9 billion in H1 2023.
Nigeria’s Windfall Tax and Banking Sector Response
In July 2023, President Bola Tinubu proposed a 50% tax on banks’ foreign exchange gains to alleviate Nigeria’s fiscal strain. However, the National Assembly raised the tax to 70%, applying it to banks’ forex gains in both 2023 and 2024.
While the measure has garnered support from major bank leaders, directors have voiced concerns, advocating for a revision.
Moody’s has labeled the tax as credit-negative, and industry insiders warn it could burden a sector already facing economic challenges.
Despite these concerns, Nigerian banks recorded approximately N3.3 trillion in foreign exchange gains during 2023 and Q1 2024, highlighting the substantial profits subject to the new windfall tax.
