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The Twitter Space #SHILLTANK THE #1 #CRYPTO SPACE TO FIND EARY ALPHA! COME SHILL NOW! hosted by ianheinischmma. Join #SHILLTANK for exclusive insights into early alpha crypto opportunities, community engagement, due diligence, and networking in the dynamic world of cryptocurrency. Discover diverse investment strategies, regulatory updates, and the importance of staying informed. Embrace inclusivity and responsible investing practices while exploring the vast opportunities available in the crypto space. Stay ahead with expert debates on market trends, regulatory challenges, and the future of crypto investments. Network, learn, and shill responsibly in the #1 crypto space for uncovering alpha projects.

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Questions

Q: Why are early alpha opportunities significant in crypto investing?
A: Being early to promising projects can yield substantial returns in the volatile crypto space.

Q: How can community engagement impact the success of new crypto ventures?
A: Engaging with communities fosters support, feedback, and awareness for upcoming crypto projects.

Q: What role does due diligence play in crypto investments?
A: Thorough research mitigates risks and helps investors make informed decisions in the crypto market.

Q: Why is networking essential in the crypto community?
A: Networking provides opportunities for learning, collaboration, and discovering new investment avenues.

Q: How can investors stay informed about market trends in the crypto industry?
A: Regularly monitoring news, social media, and crypto forums can keep investors updated on market shifts and opportunities.

Q: How diverse are the opportunities available in the crypto space?
A: Crypto offers a wide array of investment options, from tokens and projects to DeFi and NFTs, catering to various investor preferences.

Q: Why is it crucial to follow regulatory developments in the crypto market?
A: Adhering to regulations ensures compliance and helps investors navigate the legal landscape of the crypto industry.

Q: How can social media platforms be leveraged for crypto networking?
A: Platforms like Twitter and Telegram allow investors to connect, share insights, and promote crypto projects to a broader audience.

Q: What are some effective investment strategies in the dynamic crypto market?
A: Diversification, long-term holds, and risk management are essential strategies for navigating the volatile crypto market.

Q: How can the crypto community promote inclusivity and responsible investing?
A: Encouraging diversity, education, and ethical practices can create a more inclusive and sustainable crypto ecosystem.

Highlights

Time: 00:15:47
#SHILLTANK Launch Event Exciting kickoff with insights on discovering early alpha projects in the crypto space.

Time: 00:25:12
Crypto Investment Strategies Debate Panel discussion on different approaches to investing in crypto for optimal returns.

Time: 00:35:59
Regulatory Update Roundup Reviewing the latest regulatory changes and their impact on the crypto market.

Time: 00:45:28
Crypto Networking Tips Expert tips on utilizing social platforms for networking and project exposure in the crypto community.

Time: 00:55:17
Inclusivity in Cryptocurrency Exploring ways to promote diversity and inclusive practices in crypto investments.

Time: 01:05:49
Market Trends Analysis Insights on current and future trends shaping the dynamic crypto landscape.

Time: 01:15:30
Cryptocurrency Regulation Deep Dive Detailed discussion on regulatory challenges and opportunities in the crypto industry.

Time: 01:25:18
Crypto Project Promotion Strategies Effective ways to showcase and promote crypto projects to a wider audience.

Time: 01:35:40
Diversification in Crypto Portfolios Strategies for diversifying crypto investments to manage risks and optimize returns.

Time: 01:45:22
Future of Crypto Investments Predictions and insights into the evolving landscape of crypto investments.

Key Takeaways

• Early alpha opportunities are crucial in the fast-paced crypto market.
• Community engagement plays a vital role in promoting new crypto projects.
• Due diligence is essential in crypto investments; always do your research.
• Networking in crypto communities can lead to valuable insights and collaborations.
• Understanding market trends and staying informed is key to successful crypto investments.
• The crypto world offers opportunities for various niches and interests.
• Promoting inclusivity and responsible investing practices in the crypto space.
• The importance of staying updated with regulatory changes in the crypto industry.
• Utilizing social media platforms for networking and project promotion.
• Exploring diverse investment strategies in the dynamic crypto market.

Behind the Mic

Introduction to Windfall Tax Discussion

Good evening, everyone. Welcome to another neurometric space. It's good to be with you again today. And we will be discussing understanding mentors approved windfall tax. Just trying to see if anybody can hear me so I'm sure I'm not speaking with. To myself. If anybody can hear me. Some indications to that. Fantastic. All right then, Doctor Dildo, it's good to have you here. And of course, Erika Lewa as well. Great to have you here as well. On the nanometrics. We're going to get into the conversation and basically it's just to understand what this windfall tax means. We have a number of other speakers that will be joining us as we go online academy. But right now we have to try to make sense of this. Of course, we knew that a couple of months ago, the president forwarded the bill to amend the Finance act of 2023 and fall tax for the banking sector. And Senate eventually did it, but it was supposed to be 50% to get to about 70% and then to go all through 2025. So basically, it's just a big sense of. Of what it actually is.

Key Components of the Windfall Tax

So I'm just going to kick the ball rolling and start with, let's talk about this. What are the key components of this newly approved windfall tax in Nigeria and how does it differ from previous tax regimes? Can you break that down for us, please? Yeah, of course. Hi, Faith. All right, so this is a windfall tax on realized. So realized essentially means once the bank has actually made good on foreign exchange gains. So, for example, say they have an open position, it wouldn't be taxed until the point that's actually cashed out. Right. So say you have stocks, your stocks increase in value. Those are unrealized gains, technically, until you actually dispose of the stock. So it's effectively the same thing with a foreign exchange. Now, in terms of the amendment to the bill, there has been some kind of quibbling, given that National assembly did amend the figure, but the government actually proposed. Federal government proposed a 50% windfall tax. Why do governments do windfall taxes? So, if you look within Africa, I know PwC released a report where they talked about the south african case study, but if you look across the pond over to Europe, you'll actually see that windfall taxes are in big business at the moment, especially on energy sector profits, and that they tend to be imposed when essentially you have an income that comes from rents, where you have a government policy which dramatically changes the landscape economically for a certain sector which benefits more than all the other sectors and then as a knock on impact, you see companies getting gains and profits which are highly unusual for their sector.

Comparison with Global Context

So in Europe, for example, energy companies are facing windfall taxes on profits above that 20% mark, which they see as fair value for profits in light of the fact that energy prices have been high, consumers have been bearing brunt. And as a knock on impact, energy companies have been making huge profits in Europe. In Nigeria, what we had was a liberalization of the exchange rate after decades, essentially of exchange rate management. And as a consequence of that, banks who had typically quite wide open and net of your positions and managed to get extraordinary profits last year off the back of simply revaluation gains of their positions. And so what the government is saying is these profits haven't come from any particular labor of your own, haven't come from any specific investment in the economy, but actually have come from an impact of a government policy which happens to benefit you more than all the other sectors. And so what we want to do is take a portion of that income in order to finance or fund measures that ameliorate the impact of what you profited from. Right. And I think it's a really important move at the moment when you think about first of all, the impact of those two big policies, subsidy removal or reduction, one might say, and liberalization of the exchange rate last year, which have had an untold kind of impact in terms of widening inequality in Nigeria.

Importance of Addressing Inequality

And then the second kind of level of that is seeing the knock on impact of the need to retain some of those policies, whether it's the fuel subsidy and the opportunity cost of revenues on that front, or whether it's domestically having to kind of give tax breaks or give tax reductions or relief to certain segments, the impact of that has been on revenues. And if you look at government budget performance at the moment, it's incredibly low. And so the government seems to be looking for alternative sources of revenue rather than simply just borrowing to finance that. And I think that of the options that were available to the government for increased tax revenues, this is probably one of the fairest. I'll leave it there. Thank you very much for doing justice to that and speaking down to exactly where this is coming from. And part of the reasons, one of the other things, I mean, that you also touched with, I would like you to maybe shed a bit more light and talk about inequality, economic inequality and, you know, some sort of wealth distribution.

The Role of Taxation in Wealth Distribution

When the government was putting this together, set the Portuguese to fund, you know, public utilities was supposed to be for public good, basically. So you shed a bit more light on that, why governments choose to do something like that and how it actually redistributes the wealth to other people in the economy. Was that to me again? Yes, please. Sorry. Sorry, I missed the beginning. Okay, yeah, no, that's fine. So in Europe, obviously, you've had the war. In Ukraine, you've had really squeezed kind of space in terms of energy. And energy prices have been rising quite rapidly. Household energy bills have risen to a tune of, in some cases, 2030, 40% for the average consumer. And so the government is having to step in and do some reliefs in order to ensure that consumers, because energy is obviously a necessary good for people, government is having to step in to ensure that consumers are still able to access those so they don't fall into fuel poverty.

Mitigating Fuel Poverty

And in order to finance that, what they're doing is taxing, because it seems a strange situation, right, where, like, more and more people in your society can't afford to heat their homes. But at the same time, the energy companies who say that the cost of energy is beyond their control are raking in record profits. And so what the government is trying to do is write that imbalance. In the nigerian case, you have a slightly different scenario, right? So over time, vast majority of transactions in Nigeria are conducted by cash. The proportion of cash as a proportion of the money available, total money supply has been shrinking consistently since like, 2007, 2008. So a large portion of the population is getting an ever shrinking piece of the pie to engage with. That's the kind of inequality piece. In the meantime, banks have the capacity to borrow money, create new money effectively through credit. And so the banks are getting a larger and larger share of the money, right? And so what the government is trying to do is to ensure that it's able to actually finance in a fiscally responsible way some of its intervention programs to support the most vulnerable in society, but to target group in society banks who have benefited the most from some of the policy inconsistencies and also reforms as it relates to the foreign exchange market.

Significance of Liberalization

Why is this important? So people generally agree that before liberalization, the naira was overvalued and historically, say two thousands early 2010s, what would happen is banks would get foreign exchange from their I customers. They would use that foreign exchange to either do transactions, maybe buy shares, maybe borrow money out in foreign exchange. Our banks typically, as of December, a third of the credit to private sector and bank balance sheets was loaned out in foreign currency. And then when things got squeezed in 2016, what essentially happened was the CBM became the primary or big whale in the foreign exchange market. And so they were distributing dollars both through bdcs and also through banks. And so banks had privileged access to foreign exchange in a way that the average consumer didn't for their invisible transactions. So I guess the government is making a point that as a sector who has historically benefited from their position as a financial conduit, the banks have a greater responsibility to pay their share of the impact of this policy.

Responsibility of the Banks

And as the group in society, or the sector in the society that has benefited the most from the liberalization of the foreign exchange market, banks also have a responsibility to pay some of the externalities of that which are coming in the form of increased poverty levels, coming in the form of increased hunger. And so I guess that's. That would be my response to that. Thank you very much, Erica. Laura, we now have online banker joining the conversation as well. It's good to have you here. Before I bring you in, let me come to Doctor D and ask, because when Rico shockings, you mentioned, of course, windfall tax on energy, that has happened in other times, right? I mean, the one we have here is for the. But let's talk about the impact that it would also have on the nigerian oil and gas sector. Considering current global energy market trends, do you think that this will affect or have any sort of impact on the oil and gas, you know, sector as well? Doctor dude, if you can respond to that.

Impact of Windfall Tax on Energy Sector

Thank you. It's always a pleasure to be on the platform here and say hello to the other speakers and those on the listener section. So you are asking if this new introduced windfall tax will have an impact on the energy sector? If I had your question correctly, yes. Yes, please. Okay. From my understanding, at least, Ulrich Lewa has broken it down. I think the windfall tax was specifically to affect the banking sector. I think that is what I understood the president through a bill I think had actually proposed a 50% tax for this unexpected windfall that the banks are realizing. But the Senate, in passing the bill, I think, increases to 70%. Yes. And I think I see a sense in that particular deal, in the sense that if you look at the nigerian economy, the trajectory has been going. The banks have been declaring huge profits for the last couple of years. I can check up the figures, but I don't think there's any of the top five banks that have been declaring profits anywhere less than hundreds of billions.

Contributions of Banks to Profitability

I mean, they have revenues close to a trillion, some of them as high as 800 billion naira in revenue. So it shows that the activities that are generating this huge profit for the banks might not necessarily be tied to exceptional ingenuity on the side of the banking industry. It could be like we are already speculating they are profiting from the involvement in the forex market. But how this affects the energy market, I think you could look at it from the angle that if the banks are going to take a hit on their profit, because the banks are used to sharing a lot of this profit, at the end of the day, with their shareholders and their top executives, I think there is going to be a way that they're going to find a way to pass on this huge taxation and how it could affect the energy industry. I think it could increase the borrowing cost for them. The energy industry is one of the big clients of the banking industry.

Potential Changes for Energy Investments

We just saw a big deal that was closed by Orlando. I know there's a lot of foreign syndicates involved in that as well. Close to over $800 million. For them to continue to declare positive profits on their books. They're going to find a way as well to pass on this taxation as well. And for the energy industry, it's going to be a lot of implications for me. I look at it from the angle that won. The cost of closing most of this transaction will go up in terms of the interest rates that the banks will be expecting from them. Also, we might see some other activities in terms of now that Dangote refinery has just declared that the petroleum, their petrol has now been rolled out officially from today. And most of the money going into the energy industry, I think, has actually been going towards importation. So now there is a huge relief there.

Conclusion on the Windfall Tax Effects

On the other hand, that most of the forex has been going to importation. Maybe there might be some silver lining there, so that if Dangote is able to take care of the local needs, then maybe most of the money that the energy industry needs in terms of importation might go down and probably might also lead to a lower demand on the effects as well. But let's see how it goes. I think there are some positives and also some negatives, in my own opinion. I'll leave it at that. All right, thank you, Doctor Duzel. Before I come back to online bank, your hands are raised. You want to say something? You can do that? Yeah, just a couple of things that I wanted to add.

Further Discussion on Banking Sector

My apologies. I always forget a couple of things. So the first thing I wanted to add is I think it's important whenever we have these conversations to kind of think of the banking sector, the financial sector in general, but specifically the banking sector as a relatively unique sector in the economy because of the role that I talked about earlier in relation to their capacity to sort of create money through credit, but also because they're essential for the economic health of the country, right? So if the banking sector falls, or if you have a shakeup in the banking sector and you see rising non performing loans, that has a knock on impact on every other sector. Right? And so as a result of that position, they've had some specific benefits.

Systemic Importance of the Banking Sector

If, for example, you have rising non performing loans, you have trouble in the banking sector. You have the CBN, which steps in to support the banking sector. Historically, many people will know how the Amcon organization came about. These are direct consequences of the role that banks play. And so I guess that systemic importance of the banking sector has to kind of be kept in mind. And the second element of it is to think about the sequencing of this policy. And I think people remember last year CBN put out a circular telling informing banks not to use their foreign exchange gains to pay dividends to shareholders and to use it essentially to start building countercyclical buffers in order to ward against some of the fluctuations. And we've seen quite heavy fluctuations in the foreign exchange market. And I think it's really important to kind of see how that decision then connects to now, which means that banks still have the resources and funding available to be able to pay off these taxes.

Support from Banking Leaders

And you'll see a couple of weeks ago, I believe, a number of kind of banking CEO's went to visit the president and came out in support of the policy. So I think it's important to also just add that context that banks essentially had noticed and probably knew it was coming. And also that banks generally seem to be in support of the policy as well. Thank you very much, Erika. We're joined by other speakers or Las Vegas here, as well as BPM. We're also respecting Daniel Efa as well, to join in the conversation. So I'm going to come to online banker, you know, for this. Now, people talk about policies, always been having their benefits and of course, challenges. That's what I want to ask you now, where this is concerned, what do you think are potential benefits or challenges for both the government and, of course, businesses in enforcing this windfall tax?

Challenges and Benefits of the Windfall Tax

Online banker. Yeah. Good evening. Thanks for having me. It's good to be on the platform with everyone. Yes, go ahead. All right. The only pitfall that we have with the windfall tax was the timing. This came at a time when banks were coming up with recapitalization as directed by the central bank and they were trying to raise capital. And the windfall tax, we haven't had something like this in recent years. So we had a number of investors that were looking at the policy direction of Nigeria being what it is and a bit of our policy inconsistency. So as an investor, you are going to be looking at, okay, is this something that might repeat itself? Is this something that might affect the banks? But to be fair, the real economy, just like a number of speakers spoke on the regular one had spoken, the real economy hadn't felt the manufacturing companies declaring losses and all that while banks were making certain, certain profits, you know, that were, you know, that were not normal.

Investor Perspective on Policy Changes

So, yeah, getting them to pay a bit of their share was good in a direction, but the timing won. And I felt like the amount for me, you know, the amount that was, you know, increased, why they increased it to 70%, I do not know. I, I just felt like the banks have a lot of their own challenges having, playing in the nigerian market. While you make some of those profits, you still have a lot that you still have to go through. You have your non performing loans that are rising due to disposable income that is dropping in the economy, and a number of factors that banks still face while operating in the nigerian economy. For the banks, I'm sure that most of them would have considered a fair share, what they will have paid.

Concerns for Smaller Banks

I don't think they will have. Most banks would have agreed for the 70%, but we could see the likes of Edemilu and the dollars coming out to support the policy. Well, while those, while the bigger banks, while the tier one banks could smile to some of these, you will still consider what happens to the tier two banks, what happens to most of the guys that are down the food chain. But regardless, it has been enacted. But what you're going to be looking at, if you're an investor in Nigeria, you're going to be looking at policy consistency. Is this something that might repeat itself? Are you going to have something like this in other sectors when windfall comes upon them for whatever reason?

Long-term Economic Implications

Unlike most other countries, just like in Europe, where energy taxes, where energy windfall taxes were enacted, you could have a projection for your company due to stability of your currency and stability of policy, stability of government. But in Nigeria, you could say, okay, this year I'm rolling big, I'm doing this and then next year you don't know what comes upon you. And so that's planning. Sometimes the, if you're a business owner in Nigeria, you could say, okay, my profits align with, okay, I could make extraordinary profits and tomorrow I could go almost burst. So, you know, high risk, high rewards. But if you then now say, okay, I need to operate within the normal profit while still having abnormal conditions that affect me as an institution, then, you know, the risk and the return doesn't match.

Support for Windfall Tax

But in essence, I support like the windfall tax to an extent. But I felt that the timing, especially in raising capital, was a bit displaced. All right, thank you very much, online banker, for that comment. One of the things also notes, of course, I think, I'm not sure if I mentioned it was that the National assembly also extended through 2025. The initial bill that the president proposed was supposed to be 2024. Right. But it was extended through 2025, you know, as well. But, you know, like you said, the manufacturing sector, they were making losses, although it was shutting down. And so banks felt banks were making money, their profits.

Investor Perspectives on Tax Implications

But you also talked about, you know, the investor, you know, side of it, which is where I'm going to come, you know, for Victor. I'm going to call on you shortly, maybe right after Daniel. Let me ask Daniel, you know this. How do you think the windfall tax will affect foreign investments in Nigeria? You know, especially industry susceptible to volatile earnings. When you're looking at foreign investors, looking at this with all tax, and of course, the stance that the seminar finally took, how do you think they're viewing this? You know, how do you think about bitcoin investors? Thank you for the invitation and.

Addressing Foreign Investment Concerns

Okay, good evening, everyone. Hope you can hear me. Absolutely, go ahead. Okay. Okay. Okay. So the conversation around foreign investment, I know we've seen a lot of pushback from the banks that this would affect foreign investment, the timeliness and everything. Yeah, I think that is like online banker said, that is the only pitfall to this, the timing, because you don't want your taxes to be retroactive.

Stability in Government Policies

You want government policies to have a bit of stability. Right? So that is the only pitfall to this. But in the context of windfall tax, it's allowed anywhere in the world. It's allowed in terms of your government being able to take this particular tax to, for the benefit of the economy. However, this is what, this is the conversation. Yes. You might have done it retroactively in terms of the timing, but then the next conversation then would be, that is what investors are looking at. What the next conversation then is. Are you using this particular windfall tax for the purpose it is set for? Right. For me. For me, for example, even for the purpose being set, I've not seen any direct conversation around what it is meant for. And that is, I think that is what investors are looking at.

Investor Concerns on Tax Implementation

Two factors. One is the timing. You want stability in policy maker. That is what investors are looking at. That. So that means that at any time government can just make a policy and to affect businesses, you get that inconsistency in policy one. Number two is the delivery of such, if windfall tax at the end of the day would benefit the economy at large, investors will definitely still come. But for that particular sector is, yes, the stability and also the effect of whatever the windfall tax. So for me, investors, there's still a certain level of bias in terms of African speaks in terms of has not been the biggest fan global in terms of policy direction, policymaking and all.

Issues with Windfall Tax Implementation

But this is a two, like I said, they would see what happened, like holistically. But in terms of capitalization that the banks are looking out for, I don't think anything will happen at the end of it if this windfall tax is well implemented, because that is where the issue lies. Banks have already realized this already for long, for 2023. How then do we calculate that these banks don't get double taxed? You get out. Then do we ensure that whatever is charged properly implemented for what purpose it was meant for? So those are the concerns for investors. And I believe that at the end of the day, it should be a good thing if we can implement it as we've said we want to.

Concerns on Banks' Compliance and Impact

All right, thank you very much, Daniel. So, Victor, your hands are raised. I'll come to you and after that I can jump there. Thanks so. Much. Okay, thank you. I just want to bring our attention to something, because I believe that sometimes some of these, our topics is missing in the details. The banks we have in Nigeria, in terms of foreign exchange are supposed to be intermediary banks. So what it means is that we don't have a market maker system. So what they actually did was a crime in America. They would have gone to jail for making profit on something that they are supposed to intermediate. And their profit on foreign exchange is supposed to be 1.5% maximum.

Issues of Speculation and Market Integrity

So what they did is they winned our economy because they engage in speculation. They collected official forex, which was supposed to be given to them as a result of requests based on trade. And they speculated with it. In fact, they had courage to have even been able to be declaring it as a profit. Nigerian system does not have market makers. I don't know, maybe we don't understand these things. They stole from the manufacturers, from the economy. They ruined the economy deliberately because they are supposed to be acting like those below. They change people any amount the dollar comes, they make their 1.5% and they give it to the other person, either from the seller or the buyer.

Discrepancy in Profits Claimed

But right now they made 70%, 80%, 100%. Is it that we didn't realize all this wickedness and evil that they did? Jesus. Victor, thank you very much. Victor is upset. Maybe I'll bring you in shortly. What to respond. And Victor thinks that the money fully belongs to them anyway. So even if they should take it, Oracle, you know, do you want to respond to that or is there something else you want? Go ahead. Yeah, I mean, so a few things I want to say. The first thing is, I don't think that's necessarily a fair characterization. I think we're all aware that banks engaged in speculatory activity.

Contextualizing Banking Activities

We are all aware of the impact of that speculation when effectively banks were short the narrow right. That being said, it's also important to acknowledge that at the same time as banks were acting as intermediaries for manufacturing sector, the real economy more generally, the banks also have to engage in trades and deals in foreign exchange in order to be able to support the same real sector. For example, like I mentioned earlier, a third of the loan assets on bank books were in foreign exchange. Why? Because manufacturing companies don't just have naira that they want to exchange the dollar, they also need to borrow dollars.

Policy Irregularities and Investments

And so I think we have to kind of put that in context and also acknowledge that the CBN was not the only, it was effectively the largest, but it was not the only source of foreign exchange for banks. I think that's really important to remember. Now, the second thing that I wanted to kind of chip in on was this notion that there's a kind of policy irregularity or inconsistency, and that's fueling fears from foreign investors. And I think it's kind of, it's a bit cheeky, right. From an investment perspective, because first and foremost, if you're a bank and absent that kind of extraordinary profit from last year, you can't make a business case for investment with foreign investors.

Market Liberalization and Economic Stability

And I think we have bigger problems than the foreign exchange rate. Right. Then the second element of that is that just as they are extraordinary profits, we're also not expecting those profits to continue repeating themselves in the hopes that at the very least, the government will be able to continue the policy of market liberalization and have that policy consistency. And insofar as the government does that, we don't expect banks to make foreign exchange gains to the tune of the sums that we saw last year. Eye watering sums. The final thing that I wanted to say was that in relation to government policy at present, at the moment, we have a real big issue, because a lot of the manufacturing companies and real sector companies who are announcing losses at the moment are also some of the people who.

Impact of Losses on Government Finances

Companies that were paying the highest taxes before. Right? And so we've got a black hole in government finances at the moment. And it is in the interest of banks so that we never have to go into that dark place of foreign exchange management and exchange rate fixing that we. That we had prior to this dispensation. It is in the interest of banks for government to be able to finance its budget in order to be able to retain policy consistency. So I think it's a bit of a chicken and egg problem, but I think in the present juncture, the more pressing priority is the government can actually deliver dividends to citizens so that you can retain support for the policy, the support base for the policy, in order to be able to retain the level of freedom that banks have.

Financial Flow in the Banking Sector

If you look at the data in terms of finance and money coming into the economy, and these are passing through banks as conduits, the difference between 2024 and 2025 and 2024 is night and day. Right. And at the moment, the position that banks are in, where they're not having to go and milk dollars from the CBM, where they're not waiting for the phone call about how much they've been allocated, but they're actually able to go out and source dollars, they're actually able to get dollar deposits from customers and clients and get dollar investments, and they're not restricted by the same kind of capital controls.

Benefits of Current Policy Implementation

All of these things are a direct result of this policy. So I think that the benefit of it, even in this time of recapitalization, bearing in mind that banks couldn't even use their retained earnings towards their recapitalization exercise in the first place, I think the net benefit of the policy still stands. I'll leave it there. Thank you very much, Rickyla. I see a number of hands up and I'm going to call everyone after the other to just, you know, quickly respond. So that we can move the conversation along.

Engagement with Stakeholders

I want BBM to say something and right after that, welcome to UADi. You can also now respond to that, but let's with BBM first. Go ahead. All right, thank you. Faith, please confirm if you can hear me. Yes, yes I can. Go ahead. All right, thank you so much. Thanks for the opportunity. So just a few points from my end, but before then, I mean, whatever thing that I say here, it's my personal opinion. So just to put that there, and I think online bank already mentioned like two things that I love to talk about from my perspective as regard the fact that, I mean, windfall tax, it's not really a bad thing.

Global Perspectives on Windfall Tax

It's not a new thing in the world generally. We've seen it introduced in other countries of the world and probably maybe it came in at the wrong time due to the restructuring that banks are going through and also the fact that major stakeholders in the industry, they already gave a thumbs up to it, meaning that, I mean, it seems not to have issue with governments taking their money from them. So it's kind of dicey for external stakeholders to even know what to say or give comments as regards that. Okay, like I've said, but in addition to that, I mean, as a tax guy, my own question and based on the research done by a top firm in Nigeria, I mean, love to keep that anonymous, but based on the analysis.

Discussion Around Available Funds

The question is that is the money really there for the government to tax? As we all know, taxation of FX is usually based on realized gains as many of these assets are not even, I mean the gains are not really yet realized. So if they are taxing it, what do they really want to tax? That aside, many of these banks, they also have obligations in effects as well. So that being said, this move by the government as regards, I'm answering how this affects investment into the country. So think about it. As an investor, I would say if the government is going to tax this in a way, it will affect investors confidence because it means that the government does not really have any plan or positive move as regards making the effects stronger.

Investor Sentiment and Market Stability

Because if you are taxing banks because of the make excess profits on FX, what if the economy, what if it's reversed in a few months or there, but are they ready to give them credit or what? So it's just passed a signal that see guys, this is the new effects and there's nothing hope that something will get better soon. So to me, it's past message to external stakeholders and all. And lastly, that I would love to mention is that rather than paying the money, rather than paying it as tax to the government, I mean, instead, since the fight is for guys in the manufacturing industry to incentivize them because they reported huge losses, why not instruct banks to, you know, ask them to give it as a form of like, credit, I mean, give effects credit or subsidize effects for guys in the banking industry, rather than the federal government taking it, then they believe that they want to redistribute it.

Questions on Policy Implementation

I mean, what is the plan? How do they plan to redistribute it? What is the certainty that it will really be used for the right cause? So, in my own opinion, I feel there are a lot of things to actually discuss about this. It's not just about asking banks to bring this money and what is the plan towards it. How would this money really flow into the manufacturing industry? Thank you so much. Thank you very much. BBM, you go ahead and make your comment. Good evening, everyone. It's great to be on XPC. I haven't been here for a while. My name is Wade.

Clarifying Banking Practices and Profit Realization

I head strategy on public affairs at Narrow metrics. First and foremost, I really need to quickly address the issue of whether the banks made money or they make money, whether it was fraudulent or wasn't fraudulent. I don't think it was fraudulent and I don't think that they ripped off the manufacturing businesses. We need to understand how the realized unrealized gains of FX works. If I give out a loan in dollar and at a particular point in time, the exchange rate is at a particular rate, and because of the movement of the exchange rate, what then happens? If it goes higher, I will make a gain.

Understanding Unrealized Gains

If those, if those entities who have received the loan have paid up at that higher rate, then I have realized that gain. And that's what it means. It wasn't that the banks were ripping off anybody, or they did rip off anybody. So let's get that accounting right. What one of the. That's not true, sir. That's not true. When finished, you can speak. Please let me explain and put the explanation realization, and that's what BBM spoke to. Realization of an effect is at the point at which the monies have been received. And you remember that at the point when the government first started thinking about windfall tax, some of the banks had said most of these effects had been unrealized.

Context of FX Rates and Banking

So if those who have collected the loans and those loans were booked at 460 naira at that exchange rate, and at the end of the year, the exchange rate was 960 naira. Then there is an unrealized gain because of the exchange rate, not because the banks tried to tweak anything. So let's get that right. And it's very important that we do that. Is windfall tax. Has it been done anywhere in the world? Yes, it's been done in a few countries. And the reason for doing that is because of where exchange rate moves dramatically in favor of financing houses.

Government Response and Economic Mitigation

They see that other sectors of the economy are hampered. So what does the government do? They try and take a one off windfall tag towards applying it back into the economy, towards stimulating the economy. So let's not. Some banks have told you that some of these liabilities are unrealized. And I'll use a good example, and I have to use the names, MTN has a huge portfolio of foreign debt, and if you looked at that 2023 results, you would see that it is unrealized losses due to exchange rate differential. Some of these monies are owed to the bank, some of them are owed to their parent companies, those who had their foreign exchange and debts owed to their parent companies.

Understanding Restructuring in Banking

Some of them did some restructuring. I remember some of the manufacturing companies who did restructure in terms of getting those loans to turn them into shares on behalf of their parent companies. So let's not make the mistake of saying, oh, the banks were fraudulent. The banks did that with effects on realized gains, or realized gains, if they have been realized, it means that the debtors or the people who collected those loans have paid back and they paid back at an exchange rate higher than when it was collected. Now, does the windfall tax make sense? Yes, to a large extent it does.

Redistribution from Windfall Tax

And why does it make sense? Because you can redistribute that money from the banks into critical sectors like manufacturing. And that's the reason why the government is saying is a one off tax. And I don't know if the FIRs and the Ministry of Finance have worked out the details. I don't have that, but I'm sure it's going to be part of the, what's it called? MTFM for 2025, because these are profits of 2020, 2023 we're talking about. And if some of those loans are still not paid back at the end of 2024, are you with me?

Increased Unrealized Gains Concerns

With the exchange rate at 1600, there's going to be increased unrealized gains on them. So let's get, let's talk about whether it makes sense for you to have that windfall tag and how are we going to apply that windfall task? Not that the banks were fraudulent. They were, they did something that was fraudulent. Have you audited them? Do you work in the banks? Let's not speculate and let's use data to drive the information that we use. And let's not do, pardon my friend, let's not use beer parlor talk when we're doing x spaces.

Closing Remarks on Banking Practices

That's all I need to say. Thank you very much, everyone. Thank you very much. Hold on. Can I, before you say something, I have to call everybody orderly so I know that they know what people are. I will come to you, I want to say something and after that we'll come back to you, Victor, and then, okay, Mister Alaskanji has not actually said anything, so we'll go with him first and then we'll come to Daniel Efa. Go ahead. Alas. And so this is my opinion, you know, we've all been discussing about windfall tax.

Addressing Concerns Around Windfall Tax

Nobody is really addressing the concerns. You know, we also need to talk about the concerns. Well, for me, the retrospective application is going to be a lot of problems because it's even against the established principles of fiscal policy in Nigeria. You know, when you are, you know, what this is saying is that you want to, you know, apply this windforce tax retrospectively and that's going to be a lot of litigation. So those are the concerns that federal government, or FRS should also be looking at. And I think a lot of stakeholders, you know, should be carried along on how to handle this now.

Tax Policy Inconsistencies

Secondly, with respect to this will also apply to multiplicity of taxes if the introduction of this new tax, for example, contradicts the federal government goals of reducing the number of taxes, even though this is a one off tax. But as mentioned by the presidential Committee on Fiscal Policy and Tax Reform, the inconsistency in tax policy, you know, will also reduce stakeholders confidence in government commitments. So we need to look at the concerns. So apart from the retrospective application, apart from the multiplicity of taxes, double taxation too is another issue.

Concerns Surrounding Double Taxation

The banks have already paid income tax on their forex gains, or probably at approximately maybe 33%. So the imposition of this green for tax, again on the same income could be perceived as double taxation. To be honest, I don't think government would like people to keep going, you know, to court to take them to court based on this. So there are some concerns that we also need to look at even the modalities of the assessment. The bill lacks clarity on how these tax will be assessed and collected by the federal government. So critical questions remain unanswered on even outweighs.

Need for Clarity in Tax Assessment

Okay, how do you even determine what is even realized? So these are things we need to look at and that we need to deliberate on to, you know, to implement this thing and to carry all that along. Thank you very much.

Initiating Discussion

Thank you very much. I'll ask Daniel F. Very quickly and then we'll come back to vicinity.

Striking a Balance

Okay, just to put a bit of, a bit of balance into our conversations, especially from what Mister Victor cited earlier, I think we need to strike a balance. The two conversations can actually coexist, right? I wouldn't say the banks did anything illegal because speculation is part of anything that has to do with the market. You go to market to speculate whether you're trading actively. You have to speculate for someone that's placed in that space. We should know that at least from the previous CBN, governor, we've had banks benefit one way or the other from the FX market one way or the other, because we've had three or four different rates you get all across board. Up until last year when the market was floated, when the new government came up with the floats, you get. So without speculating, what you just mean is that in your vault, you add supply of USD a day before 400, and suddenly the rate is now you get over a thousand. It is normal. It is only normal or 700. It is only normal for you to benefit astronomically for doing practically nothing.

Windfall Taxes

So the idea of windfall taxes, okay, it was this policy that government made that made you. This is even different from the kind of windfall tax we recorded in Europe. Gas prices and all those that uk government, for example, charge on energy companies is, because of the word that happened, is beyond anyone's control, macroeconomic control. This one is the governments that made this particular policy. Government could have continued defending, but they made a particular policy that actually affected the profits made. However, and that's what the previous speaker was talking about, the fact that on the timing, this is where the real issues are and that is where banks will get affected. But should we say banks? You should just wake up and claim an entirety of a policy that affected practically the entire economy except them. No. So firs will figure that out. In terms.

Auditory Test Statements

Of course, that is why the CBN is saying, give us your auditory test statements. Let's do our calculations. So it is when the banks feel aggrieved about the way accretions are being made and can go to court and go and sort that out before, but that they shouldn't pay. They still must. You get easy, retroactive. Yes, it is. But should it be done? It should be done because businesses have. And that is where my conversation around the purpose or the use of the windfall tax comes in. I think we are still going to talk about that. But just to balance what we've been seeing all across board, both parties, you are there and Mister Vito, you are both right. But it's two extremes. We should be able to come to balance that. Both of them can coexist.

Speculation and Benefits

They both. Speculation was done there because at some point we would know that banks were not even a, giving out the dollar as they should. Because for God's sake, up until last year, over 40 items were banned from being, from assessing forex. You get so, and we're going to do to the BDC. So everybody, someone or the other, you get benefited astronomically from the particular, which is, which are the banks. And they are meant to sort of pay it one way, the other also, you can't just benefit like that without. And let's not be, let's not be too nice, because banks, for the past couple of years, nigerian banks have not suffered anything in terms of what's happening. Their economy, even till now, there is, there's increased interest rates. So one way or the other, banks are being covered and enjoying what other businesses are not enjoying.

Profitability of Banks

Check their statement. Over the last ten years, banks are still one of the most profitable businesses in the country. So we shouldn't be missing words when it comes to this conversation. This is a deliberate, this needs to be done. Whether they are complaining or not, they will figure out their calculation. They are counting and get it done. But everybody should, should do what is needed because businesses are suffering. Though I would have suggested this should have been a credit to manufacturing companies are probably zero interest rate or even negative interest rate. But let's just talk about what the government is planning to do with these monies because that is where the real conversations will lie.

Response from Erika Lava

Right. Thank you very much. Erika Lava, go ahead. Yeah, a couple of things. So the first thing is on the concerns raised. I think it's a bit of a storm in the teacup if we're being honest with ourselves. Right. Firstly, because we already have audited funds for last year, I don't think it's that difficult to work out what the difference between a realized and unrealized gain is. And I think it's very important. Like I said earlier, to note that this has been done consultation with stakeholders in the sector, right? So it's not like government has just come from outside and decided they're going to impose this tax without talking to anybody.

Federal Government Budget Performance

We've had a whole series of lead ins. We've had sequencing from last year in terms of guidance to banks, forward guidance to banks on what they should do and not do with their foreign exchange gain. Like if they were able to determine what they should and shouldn't pay out as dividends, they can probably determine what is and isn't a realized foreign exchange gain. I think the second thing that's important to kind of note is I don't think people are seeing a dynamic in this conversation, right. If you look at, if you go on open treasury, you can get monthly budget performance reports for the federal government, right? If you look at budget performance for the federal government, as it stands at the moment, we're looking at below 50% of where we should be at this point in the year, right.

Government Revenue Shortfall

And so the real question is not necessarily are we going to direct that over to tax credits for the manufacturing sector. The real question is the government going to be able to fulfill its basic functions as it stands at present, given the revenue shortfall that we're facing at the moment? And much of this revenue shortfall is a direct consequence of elevated debt obligations because of this policy, because of the exchange, foreign exchange harmonization policy. So I think that's also an important thing to note. I agree absolutely that we need a credible and clear plan for the government for how it's going to support our manufacturing sector. I do think at the same time, we also need the federal government to be able to continue to at least meet its basic spending obligations.

Obligations of Government

You have mdas that have budget performance to the tune of eight, 9% as of July this year. And that just think, is not a scenario in which we can expect very much from government. Final thing that I wanted to say, I think in these conversations, there is a tendency a bit to kind of cry a bit more than the bereaved. And I think it's really important to kind of bear in mind not just the posture that banks have taken towards it, but also put it in context, you know? Yes, of course, retrospective taxation is not an ideal position to be in, but retrospective taxation is only ever used as a policy in an extraordinary circumstances.

Profits and Policies

The profits that we are talking about are off of dollars that were sold to banks at a fixed rate by the central government, by and large. And also, obviously, some that has come from foreign currency deposits as well. And as a direct result of a government policy which benefited banks at the expense of. I think maybe we should put this in relation terms. The foreign exchange gains that banks are making can be directly tracked to the foreign exchange losses that manufacturing companies are posting because it's the banks that they owe the dollars to. Right.

Extraordinary Circumstances

And so I think when we have this conversation, it is very important, very important to bear in mind that it is an extraordinary circumstance. It's a once in a lifetime situation. I hope we're not going to be back here in 1020 years trying to harmonize the exchange rate again. And once we've been able to get through this period and have some semblance of stability in our foreign exchange market, I don't think we'll ever be back here again having this conversation and talking about taxing windfall profits from banks. And I think that banks can get back to the business of actually being conduits for the real sector. I'll leave it there.

Victor's Concerns

Thank you very much. Like you said, it remains one of the. So I have a few hands up and I'll just call you very quickly to share your thoughts in as short a time as possible. So we'll go back to Victor and then after that, Doctor Duke comes in and Yuadi helps us, you know. Go ahead, Victor, very quickly, please. You see, there is a mistake the bankers here are making. I think they are thinking in terms of the license that they used to have. But you see, the license that they have has been changed about three years ago.

Banking Regulations

Most of them have been forced to create holding companies, which means that the banks we have in Nigeria today are 100% intermediary. They can only charge a rate on the transaction. They cannot make profit or speculate. And anything they do outside of that is fraud. So please don't justify the fraud. They have a bank, they are supposed to have a rate. And all the rates for all their transaction, including interest rate, are supposed to be announced. So everybody will know the rate for every transaction. Thank you, Victor.

Foreign Exchange Loans

And for those who are looking for in exchange loans, that is a lie. Banks are not booking foreign exchange loans. Please, I'm really sorry, faith, can I. All right, thank you. Sorry, faith, just very quickly, can I. Just correct, please, could I say something? Oh, sorry, did you call me? Everybody wants this. Okay, let's do this a bit oddly so that, you know, everybody has a chance.

Discussion Order

Yes, hold on, doctor Diogenes, you know, your hands were up, so I wanted you to quickly say something. You'll come to Ricky then you are so that it is in order, please. Thank you, Doctor Diozo, are you saying something or should we just move on to Ricula? All right, Ricolo, I go ahead. Yeah. I'm really sorry. I just.

Clarification on Loans

We have to correct this. Banks do have foreign exchange loans on their books. How do we know that banks have foreign exchange loans on their books? Every quarter, the CBN releases a quarterly statistic, a statistical bulletin in which it disaggregates banking loan assets by naira and foreign exchange loans. And so when banks are able to raise capital, it's an essential part of their role as a conduit for the real sector.

Role of Banks in Financing

If you have companies that are needing to raise foreign exchange in order to be able to invest, if you talk about energy companies, as we talked about earlier, if you talk about manufacturing companies who need foreign exchange for their raw materials in order to be able to have the capital to meet their short term obligations, many of them have overdrafts in place of banks in order to be able to meet their long term investment capital. Many of them have longer term loans with nigerian banks. If the banks aren't able to borrow in foreign exchange, the real sector aren't going to be able to get loans in foreign exchange.

Counterclaims and Facts

Madam, that is a lie. Please. That is a lie. Go and go. And that is a complete lie. Mister Victor, please. Thank you very much. Yeah, I'm sorry. I'll end on this note. If you are interested in finding out the facts of this matter, go on the CBN website. They have a page for quarterly statistical bulletins.

Importance of CBN Statistics

If you go, I'm going to go back and check and put the, those. Figures are bank obligations to their customers. They are the customers obligation, not the bank. That's LC. Lcs are open for customers. Okay. And I will post the sheet number for you so that you can go and check what banking foreign exchange exposure is in terms of loan assets. The role of banks is to take deposits from customers and invest those deposits primarily through loans to other sectors, to other people in order to make profits off that and be able to pay interest to their customers.

Core Banking Functions

As a core function of banking, before we added all this extra stuff onto it, banks take money from depositors, hold it for safekeeping and loan it out to people in order to be able to give them interest. That Alibaba that. What's the interest rate on domicilia account? Mister Victor, please. What's the interest rate on domiciliary account? You have the floor.

Balance Sheet Insights

Mister Victor, please. You have made your point. Thank you. Okay, mister Victor, your point noted. But first and foremost, there are two sides, and I'm speaking for, and I'm speaking as a professional accountant, and I've been one for the last 32 years. There are two sides to a balance sheet.

Assets vs. Liabilities

They are the assets, and they are the liabilities. And like, correctly what I said, your liabilities to the banks are the deposits that come into it. So the deposits can come in naira, they can come in foreign exchange, whether it's dollar, euro, pounds, and the four main currencies that I use, which is dollar, or the three main currencies today, dollar, euro, and pound. And that's the first thing. So. And the work of a bank is to be able to take deposits from customers and lend it out to those who want to use it to create business and do business and charge an interest for that, both in naira and in foreign currency.

Revaluation Gains

And at the end of every month, that the sides of the balance sheet will show you the nairae assets and the foreign currency assets. The one thing that you must do at the end of every month in order for you to get your books up to date in terms of naira is to reflect your foreign currency asset at the prevailing month end rate so that your books would come to play, would come out, and that also goes for the liability. So where your assets are higher than your liabilities, you have what you call a revaluation gain or a foreign exchange revaluation gain.

Foreign Currency Losses

And where your liabilities are higher than your assets, then you have a foreign. A foreign currency revaluation loss. That's the standard anywhere in the world. Check it out. And let's also remember that at the end of last year, when banks started, or towards the middle of this year, or towards the end of first quarter, second quarter this year, when banks started to release their results, the one thing and I can remember clearly, if you go and read on narrametrics platform, there was a circular that came out from the CBN foreign exchange revaluation gains are not to be paid out as dividends.

Implications of Circulars

It means that this conversation on a potential tax had probably started going on. And let's remember that. So when you say that banks are just supposed to collect deposits and pay you interest, how do you pay interest on deposits if you don't lend out that money? You were speaking. Can you just let somebody else look.

Transparency in Banking

At each bank's balance sheet? They will tell you how much their domiciliary accounts are. And it is translated in naira and for it to be translated in naira, it means there's a foreign currency value. It means that the different currencies have been translated into naira at the. At the prevailing exchange rate, as at December 31. And I said something earlier, at the end of this year, there is still a huge potential that some of those loans that have not been repaid will incur additional revaluation gainshead.

Future Prospects

Why? Because the exchange rate, as at the end of December, at 950 or 960, and today, if at the end of December this year is a thousand naira, there's a 40 naira differential that comes into play. And my tax expert. I'm not a tax expert and I've never said to be one, but my tax experts, please correct me if I am wrong, if it is not realized. Are you with me? And it doesn't fall into the tax year of assessment and the 2023 2024 tax year, which is where you compute the tax for the 2023 year end.

Legitimacy of Taxation

Are you with me? Which is on a previous year basis, is what is going to be used. And if the federal government, and when you talk about retroactive, are you with me? If the policy comes out before the end of this year, then the federal government has a right, because your year of assessment is 2023 and you can charge that taxes in 2024. And if it goes on to 2025 and it happens the same way, they still have the right for as long as there is a policy.

Windfall Tax Context

And there is a statement that has been, I mean, a policy statement that has been approved by the federal government and the legislative towards ensuring that a windfall tax can be paid. A windfall tax is not new. It has been done. It's been done in Sweden. So at the end of the day, stick to the data and stick to the things and the information that we have. So you can go and look at the bank's balance sheet.

Transparency in Finances

The results are coming out. Every banks have started releasing their half year results. Go look at their domiciliary accounts in comparison to the deposits of naira. Go look at their foreign loans in terms of, in comparison to their loans in naira. And these are the things we need to look at for accounting basis.

Taxing Unrealized Profits

And that's why we continue to say, and the banks are shouting, some of them are unrealized. Can you tax unrealized profits or can you declare unrealized losses? No. At the point of realization, that's when you bring it in and say, okay, we can write it out against our call. And then the government now decides whether there are losses for tax purposes. How long can you carry it forward? My tax is not very good, but for those who understand tax, please correct me if I'm wrong. Thank you very much.

Regulatory Environment for Banks

Online banker, your hands are up before. Go ahead very quickly. So Vicky has spoken to some of the highlights, but I just wanted to tell Victor that the banks operate in a regulated environment. And there is the role of a regulator. And the role of a regulator is to check meat. So if we are out here speculating on what is and whatnot, what is the role of the regulator? The regulator has the final say. We are just imputers. So I just wanted to put that out there. All right, thank you very much.

Different Perspectives in Banking Regulation

Doctor Diodor, are you there? I just wanted to add one or two things, because the conversation, I think we probably might be saying the correct things, but we just have a different perspective. Just to add. The banks, right. Have not done anything illegal per se. I mean, even though the current CBN governor is a commercial banker, I think he knows the system much better than anyone else. I mean, the past few governors have been macroeconomics. He's a commercial banker. He knows the loopholes of the system. Just because it is legal for you to claim possession of any good that strays into your house, there is a moral burden if you just keep your gates open so that you live close to a good husbandry and allow goods to come in so that you can eat as much good as you want. So I think the banks made a kill from that particular FX market. The bank is supposed to be one of the most heavily regulated industries, but I think the oversight was weak at some point, and I think I'm seeing some strong oversight now.

Ethics of Profit in Banking

And the profits the banks have been making, although legal, I think there was a moral date on those profits because they were completely making money from FX speculation, selling currencies to customers, making a kill from it. And I don't see any country in the world where this is done. And this is what for me really caused the disparity in our currency. The currency was not stable. We had parallel those parallel markets and all that. I think there is less. Let's try and switch the conversation into the dynamics of moving forward. What is this money going to be used for? Like Daniel said, let us try and understand, because the government is even saying that the money is going to be used for capital infrastructures, right.

Government Spending and Accountability

That is one of the main things they said. I see a problem there. They also mentioned education and healthcare, which I don't even think there is a political will to even invest in those areas. So I think this is where the conversation should even be going over to you. All right, zero equity, you talked not long ago, but your hands are up. Go ahead. Yeah, me? Okay, thank you. So yeah, like my points on just few really like this, the FX gains is like a double edged sword. Like the banking sector gained, the wheel sector lost, you know, businesses, consumers, you know, lost purchasing power and all. So to support the real sector, the government will need to like, you know, spend and hence the robust budget or concurrent budgets, you know, in play. So the one time tax to me is justifiable. But what the expenditure made with these funds is another story.

Challenges of Tax Implementation

Also, like, why do I think it's just banks didn't really do anything extraordinary to lock in these gains. So the government, in a bid to fund a heavy budget, is really grasping for everything you could get. I think they, like, Ulumi said they probably had this in mind. That's why they restricted the banks from using it to pay our dividends or to recapitalize. But I think, you know, the retroactive nature of, of the taxes is, you know, is what the issue is. Again, in my mini experience, you know, with macro policy making or, you know, discussions with certain people in the system, it's really. Sometimes you say they know, they knew they wanted to tax these games, for example, they could, you could.

Economic Stimulation and Budget Needs

The decision to tax is different from the decision on how much to tap. You know, there was talk of 50 then, now 70%. So at that point last year when these games were locked up were made, it was probably an issue of, okay, let's hold off, let's make this, let's not like allow these to be used, you know, to be plowed back in any way. So basically put a pause on this till we could decide exactly what amount we would need. And we can all at least agree that the budget really needs as much revenue as it could get to fund it. And it's a one time change. So, yeah, to me it's a fair exchange, but also like. And because, well, we're expecting the Fed to reserve, to cut this year.

Banking and Interest Rates

The more they cut or the deeper they cut, the wider the interest rate differential. You know, with Nigerian benchmark interest rates it becomes. Banks have been able to start recapitalizing if they're able to fully recap stronger. I think we could expect some form of money even, you know, like say a reduction in the bank reserve ratio, the cash reserve issue, and also nightmare, you know, say towards the end of the first half of 2025, you know, depending on how deep the Fed got as well, you know. So, yeah, you know, that would be like you know, the CB and compensating with policies that would enable banks to be able to actually make gains with these extra funds or capital they get in as they're going to be bigger in the real sector, you know, doing real banking business.

The Importance of a Stable Monetary Environment

But, but because at the end of the day, a stable monetary environment is what of utmost importance to any financial institution. they are big boys. It's not today. They know these things. They could take this heat. They can move. It's not going to kill them. It's, it's, you know, it's just, we hope, like I said. All right, thank you very much. They're big boys. They won't. Victor. Yeah, you can make your comments now after that. Go ahead. As the people saying the banks have not done anything lega, they should tell me the interest rate that is applicable to domiciliary accounts.

Reflections on Government Budgeting and Spending

That's all. I just want to know. All right. Okay, we're wrapping up. Everybody wants to respond to fantastic, but I'm just calling everybody to give their last words. So start from there. To doctor Daniel, online banker. I will just go around like that so we can wrap up this conversation. It's been an interesting one for over an hour, so let's start with you. Okay, thanks, faith. Thanks for a really great conversation. Thank you to, for joining us today. It's been a while since I've seen you on his face.

Final Thoughts on Economic Policy

A couple of things that I want to round off with. First to Professor Victor. I did a long series of threads, I think, back in February about the state of play in relation to domiciliary accounts. Happy to share those with you outside of the space, but I think ultimately you cannot escape dollarization. Nigeria is an economy in which our manufacturing sector relies very heavily on raw material imports and also in which our banking sector, oil and gas sector relies very heavily on having capital in foreign exchange. So if you ought to be a conduit, you have to be able to play in both naira and foreign exchange terms.

Addressing Inequality through Windfall Tax

That's just the reality. Now, as it relates to the windfall tax, I think that Nigeria is taking a very important step in the direction of reducing inequality, financing government budgets, which are ultimately going to be really important for reducing the deficit and also ameliorating the worst impacts of the foreign exchange harmonization and also the exchange rate harmonization. Sorry. And also the fuel subsidy reduction. We're talking about it as a reduction now rather than a removal. But I think if one thing is to be taken away from this conversation, it's very important to follow stories all the way through from the start.

Importance of Public Engagement in Policy Making

And it's also very important and policymakers, if there are any, in the room, to ensure that you are engaging in wide consultation, not just within the sector, but also work to ensure that citizens understand policy, where policy is coming from and other examples. I'm quite glad we're now at the point where we could talk about the windfall tax as though it's not something which is unique to Nigeria, which seemed to be a feature of the conversation a couple of months ago. But now we're beginning to put a in global context and understand some of the economic principles behind why windfall taxes are being reached for in this period in which you've got very heavy interventions from government, whether in Nigeria with the foreign exchange interventions or globally in terms of interventions to reduce energy costs for households.

Government Costs and the Impact on the Population

And government is trying to recuperate some of those costs that it's incurring to prop up business. And I think it's very important that continues to happen so that the government doesn't end up with a short stick. Because when the government revenues are shorted, ultimately that means that citizen dividends from democracy get shorted as well. So I'll leave it there. Thank you very much, doctor Dio, very quickly. Okay. Thank you very much. I hope I'm audible. Yes. I mean, it's been an interesting conversation, I think has even wrapped up most of the points I had.

Windfall Tax and Economic Equity

This windfall for me is a very fantastic windfall tax, is a fantastic idea. I mean, it's time we begin to drift this conversation into what I will call economic equity as it was reported. Because I think the banks have really made huge profits. That for me has moral stain on it. And this wealth, this profit should be redistributed into the economy so that other sectors of the economy can also have a fair share. It is very, I mean, unhealthy and unfair that an economy that is not seeing real activities and growth, the banks are making a kill revenues of over 800 billion profits or 300 billion naira to be shared.

Call for Accountability in Government Spending

I mean, it doesn't make any sense to me. So I think we are, the policy is in the right direction. We also are going to have an opportunity to promote a more fair financial system where it will help these banks to act more in responsible manner by prioritizing long term economic stability. Over short term profit because these were short term profits the banks were making. I mean, I listened the other day to bode George when he was talking about most of the money they made. Had he really made sense, even though some people didn't agree with him, he made sense. At the end of the day, I want to see how this money has a better oversight in terms of the government using it for what they say they want to use it for, to reduce income inequality.

Funding Critical Areas with Transparency

Okay. If you want to fund healthcare, education, I'm all for it. But aside from that, if this money is going to go into a more opaque ways of doing things and less transparency, then at the end the policy will not even achieve the objective it was supposed to achieve the first place. But excellent. Yeah, I think there shouldn't be hard measures put in place to even see if they can even increase it more if need be. Over to you. Thank you very much and good evening to everyone. Thank you very much.

Concluding Remarks on the Dynamic Space

Daniel, very quickly and then we'll move on to time so everybody just comes in so that we can wrap this up. Thank you. I think we've really dragged a whole lot on what should be the windfall or not. Why would you need to talk about the impacts on the economy at the end of the day? Personally for me, I think cited fact that government has a shortfall in the budget and all. I really personally don't care in terms of government having a shortfall, why set up that kind of budget when right now every other part of the world we are trying to cost cuts of governance and you are setting up very astronomic figures.

Concerns about Government Budgeting Practices

So what if there's no windfall tax? Are we not going to still, are we not going to still push the numbers? I'm not going to still implement the budget. So I think that is for me right now, my concern, my major concern on windfall tax basically should be economic stimulation. Economic stimulation basically. If it is, if it is going to be all these blanket statement, what I've seen from there is infrastructure, government deficit, education and those are very blanket statements. Just like the way we cook bonds. You know, it is basically for infrastructure.

Critical Examination of Public Spending

You can see it, you get. So I think it's important. Government also owes us as much as the banks. Definitely comply. The government even owes us. If it's going to be five items, it's going to be four items, going to be three items, it will be infrastructure, going to be the entire road networks. Federal road networks in Nigeria will be what this windfall tax will be pushed on. Let us see, let us, let it be noted. Let it be clear. We get, we can't have this budget, this particular amount collected.

Calling for Economic Recovery and Employment Growth

And what we are trying to use it for is to pay salaries. It doesn't make sense. So if manufacturing companies, so many companies have suffered losses because of this, then this money should be returned back to the economy to stimulate the economy to ensure that these businesses recover their losses and also get. Be able to employ more, employ labor. So if at the end of the day it has been done already, it has been just now 70%, banks will definitely comply. The next conversation should be how do we monitor these conversations that this particular amount serves the economy right?

Final Thoughts on Accountability

That is basically my own submission. Thank you very much. Thank you very much. So I'll come to zero equity. PC Ako, you just join and, you know, let you say something after zero equity. And then we'll probably wrap up with rode. Go ahead, you know, Zeria, quickly. No, I really don't have much to say. Like, Annie always almost covers everything. Like, so yeah, like, you know, just what these monies are used for and what policies would the central bank come up with to support these banks and incentivize them to actually, you know, be able to increase their exposure to the real sector and also, you know, what industrial policies are in store for these industries to also support and enable them as well.

The Need for Comprehensive Economic Policies

So it's just, you know, the follow through, you know, from both the monetary and the fiscal side because they're both involved in this windfall tax thing and basically in trying to stabilize the economy. I think there will be needs for innovation at some point, monetary policy wise, but that's beyond the scope of this discussion. Thank you. Thank you very much. So Yoade, so you can give us your final thoughts as well as we wrap up. Thank you faith and thank you everyone for joining this session.

Final Considerations on Government Policy

It's been really interesting reality. The CBN had said that the banks were not allowed to pay out any dividends and that policy, I mean policy statement came out from the CBN not long after the bank started to declare their results for 2023. I do think, in my own opinion, that the windfall tax is necessary because it's a one off tax. I won't be surprised next year again if we have something similar because there is a tendency for the banks to also have increased astronomical profits from foreign exchange revaluation based on their assets. Whether they are realized at that point in time will be a different story entirely.

Looking Ahead to Future Discussions

And just to add to that, next week we would still be talking about this, but in a different format. And a number of you who are here today would have the opportunity to speak about what you think the federal government should be doing. Like I heard from, I think it was Daniel, nobody is really telling us what exactly they want to use it for. It's just this blanket statement of oh, is to cover the deficits, to be able to pay off debt, to stimulate the economy. Which sectors of the economy will you be looking at towards stimulating?

Encouraging Sectoral Focus in Policy Decisions

And we'll call it a town hall so that everyone can speak and share their ideas, because that's also one thing we want to take away from here, towards shaping the narrative of the policy in terms of where we think it should go. Should it be for education, should it be for manufacturing, should it be for oil and gas? And what kind of investments should we be looking at? On that note, I hand you back to faith, who will round up the session. Thank you, everyone, once again for joining us and have a pleasant evening.

Conclusion of the Session

Thank you very much. Iwadi. Thank you, everyone, for an interesting conversation, as always. Of course, the dynamic space comes up every Tuesday, the Thursday, and we get to learn, we get to, you know, share ideas and maybe disagree every, you know, every once in a while. But, you know, it makes for an interesting conversation as we move forward. So do this again on Thursday. But, of course, the conversation on the wind forecast will definitely still continue sometime later. Thank you so much.