The President of the Association of Capital Market Academics, Uche Uwaleke has advised the government to spend the proceeds of the new windfall tax on vulnerable Nigerians.
Uwaleke made the recommendation at the ‘Economists’ Conference’ organized by Proshare, Lagos.
The federal government introduced plans to implement a 50 per cent windfall tax targeting banks’ foreign exchange gains for the period from June 2023 to December 2023.
But, lawmakers increased the levy to 70 per cent and extended its duration to 2025.
Uwaleke said windfall taxes have become policy instruments used to redistribute wealth, curb short-term economic instabilities such as hyperinflation and rising poverty over a temporary period.
The professor explained that the tax period for most windfall levies in Europe, Spain and UK is two years.
Uwaleke said, “In the UK, the Energy Profits Levy (EPL) or windfall levy was introduced by Rishi Sunak in May 2022 as a way of funding help for households facing rising bills as energy prices soared following Russia’s invasion of Ukraine.
“Nigeria is currently facing hyperinflation and cost of living crisis partly on account of naira devaluation from exchange rates unification.
“The revenues from windfall tax must be ringfenced- used to support the most vulnerable people who are hardest hit by the recent economic crises.”
Uwaleke noted that while windfall levies can be a veritable avenue for the government to generate revenue and address wealth inequality, their implementation requires careful planning to ensure that they do not discourage investment.
According to him, the experience of other countries has shown that the success of windfall tax implementation depends on the government’s commitment to transparency and accountability.
He said the government must ensure that the revenue generated is used for the intended specific purpose.