Last Updated on 22 July 2024 by Naijadazz

In 2023, eleven Nigerian banks faced a combined tax expense of N575.168 billion, reflecting a significant 175% increase from the N209.608 billion paid in 2022. This surge in tax liability is linked to a substantial rise in pre-tax profits, which totaled N3.722 trillion for the year, driven by increased net interest income, non-interest income, and foreign exchange revaluation gains. This figure marks an impressive 197% increase from the N1.255 trillion recorded in the previous year.
The banks included in this analysis are Access Holdings, FBNH, FCMB, Fidelity, GTCO, Jaiz Bank, Stanbic IBTC, Sterling Bank, UBA, Wema Bank, and Zenith Bank. Notably, N440.305 billion of the tax incurred was specific to the 2023 taxable year.
UBA led the group with an income tax expense of N149.984 billion, drawn from a pre-tax profit of N757.680 billion. This represented a staggering 390% increase from the N30.599 billion paid in 2022. The significant gains from foreign exchange valuation, totaling N659.257 billion, played a crucial role in UBA’s enhanced financial performance. However, these gains may attract additional taxation under a proposed 50% windfall tax on foreign exchange gains, potentially reducing profitability.
Zenith Bank, the most profitable of the group, reported a tax expense of N119.053 billion from a pre-tax profit of N795.962 billion. With foreign currency revaluation gains amounting to N228.982 billion, the proposed 50% tax on these gains could significantly impact Zenith Bank’s net profit.
Access Holdings incurred a tax burden of N109.677 billion on a pre-tax profit of N729.001 billion, marking a 642% increase from the previous year. Their substantial foreign exchange-related gains of N628 billion were a major contributor to profitability but also exposed the bank to potential tax liabilities under the new tax policy.
GTCO reported an income tax expense of N69.654 billion, with a notable N442 billion in unrealized foreign exchange gains. These unrealized gains could lead to future tax liabilities once realized, especially with the proposed 50% tax on such gains.
FBNH faced an income tax expense of N48.393 billion on a pre-tax profit of N351 billion. The bank’s lower tax expense compared to its peers is partly due to reported unrealized revaluation losses on foreign currency balances amounting to N341.558 billion in 2023.
Other banks also reported significant income tax expenses: Stanbic IBTC (N32.250 billion), Fidelity Bank (N24.806 billion), FCMB (N11.414 billion), Wema Bank (N7.675 billion), Sterling Bank (N2.065 billion), and Jaiz Bank (N167 million).
With the Nigerian government’s plan to implement a 50% tax on profits from foreign exchange revaluation to fund increased workers’ minimum wages, the tax burdens of these banks are expected to rise further. This new tax policy could impact their profitability and capital adequacy, especially if they planned to use foreign exchange gains as a buffer against currency fluctuations, as advised by the Central Bank of Nigeria.
In 2023, the combined post-tax profit for these banks was N3.156 trillion, a substantial 201% increase from the N1.048 trillion recorded in 2022. As these banks navigate the potential challenges posed by the proposed tax, careful management of foreign exchange exposure and strategic tax planning will be crucial to maintaining their financial health and investor confidence.