The Association of Bureau De Change Operators (ABCON) has requested the exemption of excise taxes on foreign exchange transactions.
Excise duty is a tax charged on manufactured goods, levied at the time of manufacture.
In a request at the House of Representatives’ Public Hearing on the Tax Reform Bill in Abuja on Thursday, ABCON President, Aminu Gwadabe said excise tax on foreign exchange transactions would exacerbate exchange rate volatility in the market if applied to licensed bureaux.
Represented by the Chairman of the North Central Zone, Thomas Okoye, Gwadabe urged lawmakers to exempt excise taxes on transactions by licensed and regulated Bureaux De Change (BDCs) to avoid over-generalizations, adding that the policy lacks clarity.
“The policy lacks clarity as the excise tax is on parallel market activities. It will be transferred to end users; it would worsen inflation as we depend highly on importation,” he said.
Possible consequence
He also warned that excise tax on foreign exchange transactions would lead to unemployment.
- Additionally, Gwadabe sought a review of the new Central Bank of Nigeria (CBN) capital financial requirements of five hundred million naira and two billion naira categories for BDC licensing.
- In a related report, Bureau De Change (BDC) operators attributed the recent strong performance of the naira to the implementation of the Central Bank of Nigeria (CBN) policy, which allows authorized dealers to sell foreign exchange directly to these licensed currency traders.
The BDC operators revealed that there is a significant forex inflow coming into the interbank window, with growing investor confidence and substantial portfolio investments entering the banks.
What you should know
The apex bank had introduced a revised guideline in December 2024, permitting licensed BDC operators to purchase foreign exchange directly from Authorized Dealers as part of its move to streamline Nigeria’s forex market and enable the naira to reflect its true value.
- However, the BDCs highlighted significant challenges, including complaints about the reluctance of banks to follow through with the policy’s implementation.
- They appealed for an extension by the CBN, stating that the attitude of the banks affected the policy’s takeoff, which was expected to end on January 31, 2025.
- In response to the pleas of the BDC operators, the CBN extended the deadline for weekly forex purchases to May 30, 2025.
Gwadebe, who acknowledged that the FX market is improving, stated that many of the banks have started the implementation of direct forex sales to the licensed BDCs, which has significantly impacted the forex market.
