2024 budget: Tinubu eyes Senate approval for extra N6.2trn
…Seeks to tax FX gains by banks in proposed amendment to finance act
By Seun Ibiyemi
President Bola Tinubu on Wednesday forwarded to the Senate for consideration and approval a request for the injection of N6.2 trillion into the N27.5 trillion 2024 budget.
Tinubu made the request via a letter read on the floor of the Senate by its President, Godswill Akpabio, during plenary, in Abuja.
The President specifically sought for withdrawal of N3.2 trillion from the Consolidated Revenue Fund, for capital expenditure.
In the second leg of the request, the President sought for withdrawal of another N3 trillion from the consolidated revenue fund for additional recurrent expenditure for the year ending on December 31, 2024.
Tinubu in the letter also sought an Act to amend the Finance Act of 2023, to impose and charge windfall tax on banks and to provide for the administration of the tax and matters related thereto.
For expeditious consideration, the Senate had already listed the two requests on its Order Paper as Executive bills for consideration.
If the requested N6.2 trillion is injected into the N27.5 trillion 2024 budget, the budget size will increase to N33.7 trillion.
Recall that in January 2024, the National Assembly passed the 2024 appropriation bill, raising its size from President Bola Tinubu’s proposed N27.5 trillion to N28.7 trillion.
The budget was increased by N1.2 trillion.
In the bill passed, the sum of N1.74 trillion was earmarked for statutory transfers, N8.27 trillion for debt servicing, N8.76 for recurrent expenditure and N9.99 trillion for capital expenditure.
The Senate said that to accommodate further requests from the Executive for additional funding, the Committee on Appropriation made some adjustments to the bill.
Some of the adjustments made include foreign exchange differential, increase of Government-Owned Enterprises’ (GOEs’) revenue, GOE’s personnel reduction, Service Wide vote (wage adjustment) and reduction from Service Wide.
Meanwhile, President Tinubu has asked the Senate to amend the 2023 Finance Act to impose a one-time windfall tax on the foreign exchange gains realised by banks in their 2023 financial statements.
The President in a letter to the Senate explained that the funds generated from this tax would be used to support capital infrastructure development, education, healthcare access, and public welfare initiatives.
According to the President, these projects are essential components of the administration’s renewed hope agenda.
The proposed amendment to the 2023 Finance Act to tax foreign exchange gains by banks stems from the huge gains recorded by Nigerian banks from foreign exchange revaluation.
Nigeria’s leading commercial banks reported substantial FX revaluation gains following the unification of the foreign exchange market. Data from reveals that for the full year 2023 and first quarter of 2024, major commercial banks listed on the NGX recorded FX revaluation gains totaling N3.37 trillion.
As a result, the Central Bank of Nigeria (CBN) declared that FX revaluation gains should be used as a buffer to mitigate significant movements in the FX rate and should not be allocated for paying dividends or operating expenses.
As part of reforms in the financial sector, the CBN in June announced the unification of the foreign exchange markets to reduce the chasm between the official market rate and that of the parallel market.
The changes in the forex market resulted in significant losses to businesses in the industrial and consumer goods sector of the economy while the banking sector saw significant gains. This is as the naira lost almost 100 percent of its value by the end of December 2023.
A review of the financial statements of leading Nigerian companies in 2023 revealed a cumulative foreign exchange revaluation loss of N1.7 trillion with MTN Nigeria as the biggest casualty at N740 billion.
The telecommunications giant was followed by consumer goods majors such as Nestle Plc and Dangote Sugar Plc with N195 billion and N172 billion FX losses respectively.
On the other hand, the three tiers of government have been benefitting from the FX revaluation gains as it now comprises around 20 percent of federal allocations shared by the three tiers of government from the previous 1.32 percent earlier in 2023.
