Femi Otedola, chairman of FBN Holdings Plc, has called for banks to curb their extravagant spending and adopt a new windfall tax to regain public trust and support the nation’s economy.
According to Otedola, Nigerian banks are spending an estimated $50 million annually on maintaining private jets, with over $500 million already spent on purchasing nine private jets by four banks.
“This level of extravagance significantly erodes public trust in our financial institutions and diverts crucial resources away from vital areas,” Otedola stated in an emailed message on Thursday.
He expressed his strong support for the recently imposed windfall tax on the sector.
Last month, the Nigerian government introduced a 70% tax on realized profits from foreign-exchange gains to improve the nation’s fiscal position.
This tax targets banks with foreign-currency assets that made significant profits when converting these assets to naira, following the central bank’s relaxation of exchange controls in June 2023 and January 2024.
The policy led to a more than 70% depreciation in the naira against the dollar.
Femi Otedola said the tax is important to ensure a fairer distribution of wealth.
“Taxing these extraordinary gains ensures a fairer distribution of wealth, allowing those who benefit disproportionately to contribute more significantly to the broader societal good. The revenue generated from windfall taxes can be channeled into essential public services such as healthcare, education, and infrastructure,” he added.
The central bank last year ordered lenders to hold on to the revaluation gains as a buffer against potential future losses.
Earlier this year, it increased minimum capital requirements for banks tenfold to enable them to overcome increasing operational challenges and support economic growth.
Otedola voiced his support for this move, saying it is “designed to strengthen the banking sector’s capacity to support Nigeria’s broader economic development goals.”
Otedola’s remarks come as the banking sector faces increased scrutiny for its spending practices and calls for more significant contributions to the public good.
He urged banks to prioritize operational efficiency, technological innovation, and customer service over executive extravagance.
“It is crucial for banks to prioritize operational efficiency, technological innovation, and customer service instead of ‘executive extravagance,'” he said.
The financial sector’s reaction to Otedola’s statements and the new tax policy will be closely watched as Nigeria navigates its economic challenges and seeks to bolster public trust in its institutions.