Ladi Balogun, Group CEO of FCMB Group, has revealed that only about 10 per cent of the bank’s foreign exchange (FX) gains recorded in 2023 are realized, minimizing the impact of the recently proposed 70 per cent windfall tax on the bank’s earnings.
Balogun made this statement during the group’s “Facts Behind the Offer” presentation at the Nigerian Exchange (NGX) recently.
Addressing concerns about the windfall tax, which targets banks’ realized forex gains from 2023, Balogun emphasized that the tax would not significantly affect FCMB’s capital or earnings.
“We do recognize that there’s a bill that is yet to be signed by the President, which will impose a tax on revaluation gains, but I must stress that it is realized gains and not unrealized gains,” he explained.
He further noted that “barely 10 percent of our gains are actually realized, so the impact on our capital or our earnings is relatively muted.”
Balogun highlighted that the majority of the group’s revaluation gains have been set aside as impairments. In 2023, FCMB posted net forex gains of approximately N24.5 billion, a figure that reflects the significant impairments provisioned against revaluation gains.
He stated, “We’ve set aside a significant amount of our forex revaluation gains as provisioning, such that the net gain in 2023 was barely about N20 billion. In 2024 so far, we’ve almost provisioned the entire revaluation gain, such that the net gain is barely up to N2 billion.”
The group’s financial performance in 2023 saw forex revaluation gains of N84 billion, up sharply from N4.3 billion in 2022. However, this was offset by net impairment losses of N59.5 billion, resulting in a net forex gain of N24.5 billion.
In the first half of 2024, FCMB’s revaluation gains were about N35.2 billion, with net impairments at about N33.0 billion, leading to a net forex gain of N1.8 billion.
Based on Balogun’s statements, FCMB’s realized net forex gains for 2023 amount to roughly N2.5 billion, with the proposed 70 per cent windfall tax equating to N1.75 billion.
This controversial tax, which has not yet been signed into law, has sparked significant debate within the Nigerian banking sector.