Zenith Bank, GTCO and UBA incur N172.4 billion in windfall taxes 

Three of Nigeria’s largest banks, Zenith Bank, Guaranty Trust Holding Company (GTCO), and United Bank for Africa (UBA), have collectively incurred windfall tax liabilities totaling N172.3 billion following the enactment of a new tax regime that targets foreign exchange gains made during periods of macroeconomic upheaval.

The charges stem from the Finance (Amendment) Act 2023, which introduced a windfall tax levy on the realized profits from foreign exchange transactions recorded by Money Deposit Banks between 2023 and 2025.

The tax, described as a 70% levy on FX windfall profits, was signed into law in August 2024 after it was passed by the National Assembly in July of the same year.

GTCO, Zenith Bank, and UBA reported windfall tax charges of N51.2 billion, N63.3 billion, and N57.9 billion, respectively, according to their audited financial statements for the 2024 fiscal year.

Why it matters 

The windfall tax represents a significant fiscal intervention by the Nigerian government aimed at capturing extraordinary gains made by banks amid the devaluation of the Naira.

In June 2023, the Central Bank of Nigeria collapsed the multiple exchange rate windows and adopted a market-driven exchange rate regime, leading to the official rate jumping from around N460/$1 to over N700/$1.

The volatility in FX markets allowed banks with large FX positions to report substantial gains—both realized and unrealized—on foreign currency-denominated assets.

According to Section 29A of the amended Act:

• “There shall be levied and paid to the benefit of the Federal Government of Nigeria a levy of 70% on the realized profits from all foreign exchange transactions of banks within the 2023 to 2025 financial years.” 

The Federal Inland Revenue Service (FIRS) has since moved to implement the law by assessing liabilities and notifying affected banks.

Breakdown by bank 

Zenith Bank – N63.3 billion 

Zenith Bank recorded a windfall tax charge of N63.3 billion for the 2023 fiscal year. The charge comes despite the bank reporting a pre-tax profit of N1.3 trillion, its highest ever.

• While the bank’s detailed breakdown of the tax has not yet been made public, the implication is that a sizable portion of its profit was derived from FX-related gains during the devaluation period.

The 70% levy on such gains significantly trimmed the bank’s post-tax profits, even as its earnings before tax surged due to revaluation gains, investment income, and improved interest margins.

GTCO – N51.1 billion 

GTCO, the holding company of Guaranty Trust Bank and other subsidiaries, disclosed that it incurred a windfall tax provision of N51.1 billion, comprising N23.7 billion for the 2023 financial year and an additional N27.4 billion likely accrued in the current fiscal period.

• According to the group, “In July 2024, the Nigerian government enacted the Windfall Tax Bill as an amendment to Section 29A of the Finance Act 2023, imposing tax on realized foreign exchange gains earned by the bank.”  
• GTCO stated that the Federal Inland Revenue Service (FIRS) advised it on the liability, and the amount has been recognized in its financial statements.

GTCO recorded a pre-tax profit of N1.2 trillion, buoyed by strong FX gains and improved net interest income following monetary tightening by the Central Bank.

UBA – N57.9 billion 

UBA’s financials show a windfall tax liability of N57.9 billion, broken down into N24.8 billion for FY 2023 and N33.1 billion for FY 2024. The bank reported a pre-tax profit of N803 billion, making the tax charge a significant hit on the bank’s bottom line.

In a detailed disclosure to investors, UBA explained:

• “The Finance (Amendment) Act 2023 now imposes and charges a windfall levy on Money Deposit Banks in Nigeria. The 2023 fiscal year was marked by a major devaluation of the Naira… Banks that held FX assets in their books reported significant unrealized and realized FX gains upon translation and settlement of transactions in foreign currencies.” 

UBA added that the liability followed a series of reconciliation meetings with FIRS, during which provisional estimates were agreed upon.

What is a windfall tax? 

Windfall taxes are typically one-off levies imposed by governments on companies that earn extraordinary profits due to external factors, such as commodity price surges, currency devaluations, or economic crises—rather than their operational performance.

• In this case, Nigerian banks, through no unique change in strategy, benefited from a macroeconomic reset that caused FX rates to spiral, inflating their book values and earnings.
• The government’s position is that such gains should be partially remitted to the public purse, especially at a time when Nigeria is grappling with mounting fiscal deficits and inflationary pressures.
• Critics, however, argue that such levies could discourage investment and create uncertainty in fiscal planning.
• But the government appears to be leveraging this mechanism as a short-term revenue strategy, especially in the absence of broad-based tax reforms or effective widening of the tax net.