Last November, Tekedia Capital agreed that we could invest up to N10 billion into the Nigerian banking sector: “Tekedia Capital Syndicate can invest N5 billion – N10 billion in your capitalization in any tier-2 bank with certain conditions and terms, focusing on strategy, execution, operations, etc. Principally, a BaaS (banking as a Service) strategy for the African market will be at the heart of the strategy. If you are a bank in Lagos, let us talk. Please note that we will not be passive investors; we will be active.”
Our community prepared for it, and as the process was progressing, a hammer was dropped: that your profit cannot be used by you in certain ways. I wrote an article that it was a bad policy, positing that the government was creating a tier system on capital when it did not give any bank free cash: “I have noted that markets become inefficient where capital is designed to have “tiers” based on many factors. Adam Smith in his invisible hands theory cautioned against that. So, if you structure your recapitalization to prefer people in New York, London, etc to invest in Nigerian banks (they export USD to Nigeria, but have to convert to Naira, to buy the equities which are sold in Naira), you are creating a tiered system. That is bad.”
We escaped. Why? Nigeria recently applied retroactive tax with the plan to tax banks’ FX gains at a special 50% hit. Now, KPMG Nigeria speaks out and I commend them. We need such loud voices because Nigeria belongs to all of us:
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‘KPMG Nigeria has strongly opposed the new tax, highlighting several potential issues. The firm argues that Nigeria’s tax policy does not support retroactive taxation, and implementing this tax on banks after they have settled their tax liabilities for the 2023 financial year could lead to legal disputes and constitutional challenges.
“Nigeria’s tax policy frowns at the retroactive application of tax laws,” the report states. “It is, therefore, surprising that the government has chosen to implement these windfall taxes retroactively. Many of these banks have submitted their tax returns for the 2023 financial years and have settled the resultant liability.”’
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