UBA, GTCO, Zenith bank hit with N172.3 billion windfall tax on forex gains

Three of Nigeria’s biggest banks—Zenith Bank, Guaranty Trust Holding Company (GTCO), and United Bank for Africa (UBA)—have incurred a combined N172.3 billion windfall tax liability, following the Finance (Amendment) Act 2023, which imposes a 70 percent levy on FX windfall profits made between 2023 and 2025.

The new tax, which was signed into law in August 2024, aims to capture extraordinary foreign exchange gains that banks recorded due to the naira’s devaluation after Nigeria adopted a market-driven exchange rate regime in June 2023.

Breakdown of tax liabilities

Zenith Bank – N63.3 billion

Zenith Bank, which reported a record N1.3 trillion pre-tax profit, has been hit with a N63.3 billion windfall tax. The charge significantly trims its post-tax earnings, as a sizable portion of its profits came from FX revaluation gains and investments.

GTCO – N51.1 billion

GTCO recorded a total windfall tax liability of N51.1 billion, comprising N23.7 billion for 2023 and an additional N27.4 billion accrued for 2024. The bank’s N1.2 trillion pre-tax profit was driven by strong FX gains and rising interest income following monetary tightening by the CBN.

UBA – N57.9 billion

UBA is facing a windfall tax of N57.9 billion, with N24.8 billion attributed to 2023 and N33.1 billion set for 2024. Despite recording N803 billion in pre-tax profit, the tax charge is expected to impact the bank’s bottom line.

Why this tax matters

The Nigerian government introduced this windfall tax to generate additional revenue from banks that benefited from foreign exchange gains during the naira’s sharp devaluation.

While the policy has sparked debate over its impact on banking sector liquidity, affected banks have recognized the liabilities in their financial reports and are working with the Federal Inland Revenue Service (FIRS) to settle payments.

As Nigeria’s financial landscape adjusts to this tax intervention, analysts will be watching closely to see how it affects bank profitability, shareholder returns, and future investment decisions.