Five banks recorded N67bn FX gains in H1

Five banks declared N67.89bn in foreign exchange gains in the first half of 2024, according to the analysis of their interim reports by The PUNCH.

According to their interim financial results filed with the Nigerian Exchange Limited, the forex gain recorded by the financial institutions for the half year was about 67.89 per cent lower compared N211.42bn posted in the prior period of 2023.

The financial institutions reviewed include FCMB Group, Ecobank Transnational Incorporated, Wema Bank, Sterling Financial Holding Company and non-interest bank, Jaiz Bank.

In the period under review, FCMB Group recorded forex gains (unrealised) valued at N35.19bn compared to N50.99bn in the same period of the previous year.

Throwing more light on the gains, FCMB in its financial statement said, “Foreign currency revaluation gain represents gains realised from the revaluation of foreign currency-denominated assets and liabilities held in the non-trading books.

“The Central Bank of Nigeria adopted a more liberal foreign exchange management system in 2023, which resulted in a significant movement in the naira exchange rate against the US dollar from N756.24/$ in June 2023 to N1,488.21/$ (Nigerian Autonomous Foreign Exchange Rate Fixing in June 2024).

“The impact of this foreign currency revaluation of net foreign currency-denominated assets and liabilities held in the non-trading books is represented as foreign exchange gains for the period ended 30 June 2024.”

Pan-African bank, ETI, recorded N21.07bn as forex translation gains lower than N156.28bn at the end of June 2023.

Wema Bank saw its forex revaluation income jump to N6.20bn in the six months of 2024 from N623.02m in June 2023. It is also about half of what the lender earned in the full year 2023 (N13.60bn).

Sterling HoldCo reported a forex revaluation gain of N5.34bn, lower than N3.63bn in June 2023.

Acknowledging the proposed 70 per cent windfall tax, in its financial statement, the lender said, “The Federal Government of Nigeria recently proposed to impose a windfall tax of 70 per cent on the realised profits from all foreign exchange transactions of banks.

“As of the reporting date, the bill for the introduction of the said windfall tax is currently undergoing the legislative process. The initial bill passed by the National Assembly has indicated that the tax would be retroactive and apply to the 2023 financial year and may extend to the 2025 financial year.  The group will review the full impact of the law when

the bill is finalised by the National Assembly and signed by the President.”

Jaiz Bank raked in N73.89m as forex revaluation gain (unrealised) of compared to a loss of N110.31m in 2023.

However, FBN Holdings reported N80.85bn forex revaluation loss, an improvement from the N192.57bn loss it suffered in the corresponding period of last year.

In mid-July, President Bola Tinubu introduced a one-time 50 per cent windfall tax aimed at the substantial foreign exchange gains reported by banks in 2023.

He proposed this tax as part of an amendment to the 2023 Finance Act, seeking to generate additional revenue for crucial infrastructure, education, and healthcare projects under his Renewed Hope Agenda.

The Senate has since increased the windfall tax to 70 per cent to be applied to FX gains of banks from when the naira was devalued till the 2025 FY.

While Moody’s Investors Service and other analysts raised concerns about the potential negative impact on the banking sector, the Chairman of FBN Holding, Femi Otedola, backed the FG’s move.

In a statement issued on Wednesday, Otedola said the proposal aligns with the ongoing efforts to reform the Nigerian banking sector to enhance economic stability and integrity within the country’s financial institutions.

The billionaire businessman also berated the banking executives for ownership of private jets, saying, “I am particularly critical of the culture of flamboyance, especially the ownership and operation of private jets.

“Nigerian banks are spending an estimated $50m annually just on maintaining private jets, with over $500m 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.”

Meanwhile, the Chairman of United Bank for Africa, Tony Elumelu, after a meeting with the president in the past week, said, “We believe in prosperity, in creating jobs and employment for our people, in democratising prosperity, and in ensuring that Nigerians have access to a good life. So today, we spoke about the Windfall Tax. We support the government.

“We believe that where extraordinary income has made a part of, it should go towards helping to alleviate poverty in the country, which is what the government intends to do. We support that, and we just believe that we should ensure that no one segment suffers, that the government is able to continue to create jobs, and that businesses are also able to do well because we need mutual prosperity.”