Nigerian Billionaire, Otedola Backs Tinubu’s Windfall Tax, Criticizes Bank Executives’ Extravagance

Femi Otedola, Chairperson of FBN Holdings, has thrown his weight behind the Bola Tinubu administration’s plan to impose a windfall tax on Nigerian banks, citing the need to curb excessive spending by bank executives.

In a statement, Otedola lambasted bank chiefs for prioritizing personal gain over their duties, particularly in their ownership and maintenance of private jets, which he estimated costs the sector $50 million annually.

Otedola argued that this extravagance erodes public trust in financial institutions and diverts resources from critical areas like operational efficiency, technological innovation, and customer service.

He urged the banking sector to realign its financial priorities and invest in areas that directly benefit customers and enhance technological infrastructure.

“A concerning trend has emerged where some bank chief executives prioritize personal gain over their duty to shareholders and customers,” Mr Otedola said. “The core values of banking—trust, integrity, and service—must be upheld. I am particularly critical of the culture of flamboyance, especially the ownership and operation of private jets.

“Nigerian banks are spending an estimated $50 million annually just on maintaining private jets, with over $500 million gone into purchasing nine private jets by four banks.

“This level of extravagance significantly erodes public trust in our financial institutions and diverts crucial resources away from vital areas such as operational efficiency, technological innovation, and customer service.

“To regain the trust of the Nigerian public and fulfil its pivotal role in the nation’s economic development, the banking sector must realign its financial priorities. Investments should be channelled into areas that directly improve customer services and enhance technological infrastructure.”

According to PREMIUM TIMES, President Tinubu wrote the Senate this month, asking lawmakers to amend the 2023 Finance Act to accommodate a windfall tax on the foreign exchange gains after a devaluation of the naira last June and this January bloated revaluation gains for banks holding assets in foreign currencies.

While the president sought approval for half of lenders’ FX gains to be charged as windfall tax, senators last Wednesday upped the rate to 70 per cent.

The push is part of the government’s plan to boost public finances in the face of a sticky cost of living crisis in Africa’s most populous nation.

Credit rating agency Moody’s warned last Thursday that raising the rate to 70 per cent from 50 per cent could have far-reaching consequences for lenders, especially the likelihood that it could hurt profits.

“This could further constrain retained earnings and banks’ ability to bolster capital buffers,” Moody’s said.

“The terms of the windfall tax have been clarified to specify that the tax shall be on the realized profits of all foreign exchange transactions from banks, which would include revaluation and trading gains,” it added.

The tax is to be applied with effect from the start of the new foreign exchange rate policy through 2025.

Mr Otedola said in the statement that the tax should be utilised in providing essential services including education, healthcare, critical infrastructure and public welfare initiatives for Nigerians and in reducing social inequality.

The billionaire investor further stated that the earnings reports of many telecoms, SMEs and manufacturing companies in the country are currently showing negative equity, implying they may be incapable of paying corporate tax for at least the next two years.

He remarked that the government’s urgent intervention is needed to close the gap.

“I also commend the recent recapitalization initiative in the banking sector, which sets minimum capital requirements of N500 billion for international banks and N200 billion for national banks,” he said.

“This move is designed to strengthen the banking sector’s capacity to support Nigeria’s broader economic development goals.”