The Nigerian government has escalated its response to the recent #EndBadGovernance protests by freezing more than $37 million worth of cryptocurrency believed to be held in wallets associated with some of the protest organizers.

This action was taken following an order by the Federal High Court in Abuja, issued by Justice Emeka Nwite on July 9, 2024.

The Economic and Financial Crimes Commission (EFCC), which initiated the freezing order, claimed that the assets were proceeds of money laundering and terrorism financing. The court granted the order ex parte, a legal procedure where the decision is made without notifying or hearing from the affected parties.

“That an order of this honourable court is hereby made freezing the wallet addresses/accounts stated in the schedule below, which wallets are owned by individuals currently being investigated for offences of money laundering and terrorism financing, pending the conclusion of the investigation,” ruled Justice Nwite after hearing the EFCC’s application.

The largest wallet frozen holds USDT 37 million (approximately $37 million), with three other wallets containing significantly smaller amounts. While the identities of the wallet owners were not disclosed in court filings, sources close to the investigation indicated that the accounts were traced to individuals suspected of organizing the #EndBadGovernance protests, which swept across multiple Nigerian cities from August 1 to 10, 2024.

These protests were sparked by widespread discontent over the rising cost of living, severe economic hardships, and a general sense of dissatisfaction with the government’s performance. As the protests gained momentum, the Nigerian government responded with a heavy hand.

Security forces reportedly killed more than 20 protesters, and in the capital city of Abuja, peaceful demonstrators and journalists—clearly identified by their press vests—were targeted with live ammunition. In the aftermath, arrests and prosecutions were swift, with police in Kano State and other regions detaining individuals suspected of looting during the demonstrations.

Additionally, seven Polish citizens were arrested in Kano for allegedly brandishing Russian flags, which the authorities linked to attempts to incite further unrest.

This crackdown on protest organizers is not without precedent. During the 2020 #EndSARS movement, which protested against police brutality and specifically targeted the notorious Special Anti-Robbery Squad (SARS), the government also employed financial measures to suppress dissent. The Central Bank of Nigeria (CBN), under the leadership of then-Governor Godwin Emefiele, froze 20 bank accounts linked to key figures in the #EndSARS movement.

Emefiele publicly labeled the protest organizers as sponsors of terrorism, a claim that significantly intensified the government’s efforts to discredit the movement. The CBN argued in court that the frozen funds were connected to terrorism financing, an assertion that played a critical role in securing a 90-day extension of the freezing order from the Federal High Court in Abuja.

However, the court later vacated the freezing order after legal negotiations between the CBN and the account holders’ legal representatives.

In both the #EndSARS and #EndBadGovernance cases, the courts have been criticized for failing to uphold the constitutional rights of Nigerian citizens to peaceful protest.

The Nigerian Constitution guarantees freedom of expression, assembly, and association, all of which are fundamental to a functioning democracy. Yet, these rights have been increasingly undermined by judicial actions that align more closely with the government’s agenda than with the protection of civil liberties.

Legal experts and human rights advocates have voiced concerns over the judiciary’s role in these instances, arguing that the courts have become complicit in the suppression of dissent. The use of ex parte orders to freeze assets without giving affected parties the opportunity to defend themselves has been particularly contentious. Critics argue that such orders circumvent due process and serve as a tool for the government to stifle opposition and dissent under the guise of national security.

The recent freezing of cryptocurrency assets linked to the #EndBadGovernance protests has only intensified these concerns. The EFCC’s application to freeze the assets was based on allegations of money laundering and terrorism financing, but the lack of transparency and the swift judicial approval of the freezing order has raised questions about the fairness of the process.

The use of financial measures to target protest organizers is seen by many as part of a broader strategy to dissuade Nigerians from exercising their constitutional rights to protest and to hold their government accountable.

The case has reignited the debate over the balance between national security and civil liberties, with many fearing that the government’s approach could set a dangerous precedent for the future of democratic expression in Nigeria. Rights advocates believes the growing pattern of financial repression, coupled with aggressive law enforcement tactics, paints a troubling picture of the state of civil rights in the country.

The banks are now the small guys: “The Bank Directors Association of Nigeria (BDAN) has raised an alarm over the recent decision by the National Assembly to impose a 70% windfall tax on foreign exchange (FX) revaluation gains by Nigerian banks, calling on the lawmakers to revisit the legislation. BDAN, representing the collective voice of bank directors across Nigeria, expressed its concerns following a meeting where the implications of the newly amended finance act were thoroughly discussed. The association described the 70% windfall tax as “excessively burdensome and ill-timed,” particularly in light of the ongoing recapitalization efforts within the banking sector.”

Indeed, you want them to raise more funds from FOREIGNERS and you are retroactively taxing them, thereby making sure those foreigners do not come. In the Igbo Nation, the elders will say that no one uses two legs to stretch at the same time. What they mean there is that most times, things must be sequenced, for the best outcome.

For a bank? Which books are the correct ones? The ones which they have published before the windfall tax or the ones we are expecting as a result of the new tax? You can do that to a farming business or a cement business or an energy business, but when it comes to banking, doing that will trigger many dependencies which may even push some correspondent banks in New York, London, etc to pause certain things UNTIL the correct books are ratified.

Good People, this is banking. The banks need to breathe also even though most do not like them! And how ironic? If the government takes out this tax, would Nigerians expect some of those bank fees to go? We the people also need to breathe from bank fees.

In its statement, BDAN urged the National Assembly to revisit the amendments, calling for constructive dialogue between lawmakers and industry stakeholders. The association emphasized the need for clarity on what exactly constitutes the FX gains to be taxed and raised concerns about how the government plans to address scenarios where banks might incur losses rather than profits from their foreign exchange transactions.

“We respectfully urge the National Assembly to revisit these amendments and engage in constructive discussion,” the statement read.

BDAN’s concerns are not isolated, as many within the financial sector share similar sentiments. The association warned that such a high levy could have long-term negative effects on the industry, potentially deterring investment and innovation, which are crucial for the sector’s development and for maintaining Nigeria’s economic stability.

Nigerian Bank Directors Urge National Assembly to Reconsider 70% Windfall Tax on Banks Amid Recapitalization Struggles

The Bank Directors Association of Nigeria (BDAN) has raised an alarm over the recent decision by the National Assembly to impose a 70% windfall tax on foreign exchange (FX) revaluation gains by Nigerian banks, calling on the lawmakers to revisit the legislation.

BDAN, representing the collective voice of bank directors across Nigeria, expressed its concerns following a meeting where the implications of the newly amended finance act were thoroughly discussed. The association described the 70% windfall tax as “excessively burdensome and ill-timed,” particularly in light of the ongoing recapitalization efforts within the banking sector.

Nigerian banks are currently undergoing a phase of capital augmentation, a critical process aimed at strengthening their financial base to better serve the economy. The introduction of such a steep tax, according to BDAN, could undermine these efforts, stifling the growth and innovation that are essential for the sector’s resilience.

“Such a high levy has the potential to stifle growth and innovation within the banking sector,” the association said.

The move has sparked widespread debate and concern within the banking sector and among financial experts, who argue that the timing and scale of the tax could have severe repercussions on the industry’s stability and growth

In its statement, BDAN urged the National Assembly to revisit the amendments, calling for constructive dialogue between lawmakers and industry stakeholders. The association emphasized the need for clarity on what exactly constitutes the FX gains to be taxed and raised concerns about how the government plans to address scenarios where banks might incur losses rather than profits from their foreign exchange transactions.

“We respectfully urge the National Assembly to revisit these amendments and engage in constructive discussion,” the statement read.

BDAN’s concerns are not isolated, as many within the financial sector share similar sentiments. The association warned that such a high levy could have long-term negative effects on the industry, potentially deterring investment and innovation, which are crucial for the sector’s development and for maintaining Nigeria’s economic stability.

The Story Background

The windfall tax is rooted in an amendment to the 2023 Finance Act, introduced by the federal government last month. Initially proposed as a 50% tax, the levy was intended to tap into the substantial foreign exchange revaluation gains reported by Nigerian banks.

These gains, which arise from the difference in value when assets and liabilities denominated in foreign currencies are revalued, have become a significant source of income for banks, particularly in the context of Nigeria’s volatile exchange rate environment.

The government justified the tax as a necessary measure to raise funds for critical infrastructure projects and social intervention programs outlined in the 2024 budget. However, in a move that surprised many, the National Assembly not only endorsed the proposal but also increased the tax rate from 50% to 70%, extending its applicability until 2025.

Financial Experts Voice Their Concerns

The imposition of the windfall tax has not only ruffled feathers in the banking sector but has also drawn sharp criticism from financial experts and tax professionals.

KPMG, a global leader in tax and advisory services, has pointed out that Nigeria’s tax laws do not support retroactive taxation, suggesting that the new policy could lead to protracted legal battles. The firm also warned that the tax might create an atmosphere of uncertainty, potentially deterring future investments in the country’s banking sector.

Similarly, PwC, another major player in the consulting industry, highlighted the risks associated with taxing already-reported profits. The firm argued that such a move could send the wrong signal to investors, who might perceive it as a sign of policy unpredictability, thereby increasing the perceived risks of doing business in Nigeria.

Divergent Views Within the Banking Sector

However, some prominent figures within the banking industry have voiced their support for the windfall tax. Femi Otedola, Chairman of FBN Holdings, has publicly endorsed the policy, urging banks to curb their excess spending on luxuries such as private jets and to focus instead on operational efficiency and customer service.

Otedola’s stance suggests that the tax could serve as a wake-up call for banks to streamline their operations and adopt more prudent financial practices.

Tony Elumelu, Chairman of UBA, also supported the tax, stating that the funds generated would be channeled towards the benefit of the masses. Elumelu’s endorsement aligns with the government’s narrative that the windfall tax is a necessary sacrifice to fund critical infrastructure and social programs that will ultimately improve the living conditions of Nigerians.

The Larger Picture

The windfall tax on FX revaluation gains comes at a time when Nigerian banks are reporting substantial profits from these transactions. An analysis by Nairametrics revealed that major banks in the country reported approximately N3.3 trillion in foreign exchange revaluation gains in 2023 and the first quarter of 2024.

These gains have become a crucial component of the banks’ revenue streams, especially in a challenging economic environment marked by currency fluctuations and inflationary pressures.

However, the question remains whether the windfall tax, as currently structured, is the best approach to harnessing these gains for national development.