Relevant Facts:
On 13 March, 2017 the Federal High Court (Coram: Honourable Justice (Prof.) Chuka Austine Obiozor (the “Court”) in an action (FHC/L/CS/126/2016: Retail Supermarkets Nigeria Limited v Citibank Nigeria Limited & Central Bank of Nigeria (the “Suit”)) filed by Retail Supermarkets Nigeria Limited (“Plaintiff”) against its banker, Citibank Nigeria Limited and the Central Bank of Nigeria, 1st and 2nd Defendants respectively (both, the “Defendants”) delivered a landmark judgment, striking down the CBN Circular Reference No. GEN/CBN/DMB/02/006 of 15 January, 2016 which compulsorily mandated banks to collect N50 (Fifty Naira) stamp duty on every deposit above N1,000 (One Thousand Naira) (the “Circular”).
The Plaintiff, who owns and manages the Shoprite brand in Nigeria in the said action sought both declarative and injunctive reliefs against the Defendants, chief among them was a declaration that the provisions of the Circular are inconsistent with Schedule 1 of the Stamp Duties Act, Cap S8 Laws of the Federation of Nigeria, 2004 (the “Act”) and are therefore invalid, null and void. The Plaintiff’s primary argument was that the implementation of the Circular by its banker i.e. deduction of the sum of N50 for every deposit into its account above N1000 exposes it to several financial losses.
The Decision:
In coming to its conclusion and consequently setting aside the Circular as well as perpetually restraining the 1st Defendant from making the N50 deductions from the Plaintiff’s account pursuant to the Circular, the Court relied heavily on the Court of Appeal’s decision in CA/L/437A/2017: Standard Chartered Bank Nigeria Limited v. Kasmal International Services Limited & 22 Ors (“Kasmal Case”). In this appeal, the appellate Court had held, among others, that a Court of law can only enforce and apply provisions of the law which are in existence and in force in Nigeria; and that there is no provision in the Act conferring powers on licensed banks in Nigeria to collect the sum of N50 for teller deposit or fund transfer above N1,000. Hence, in the absence of any contrary provision, the provisions of the Schedule to the Act, especially Item 4, unequivocally shows that documents which evidence receipts of monetary deposits by a bank are exempted from Stamp Duties. Thus, there is no obligation to deduct stamp duty from deposits or transfers.
Our Thoughts:
It is pertinent to note that the appeal as constituted in the Kasmal Case arose from the decision of the Federal High Court in Suit No: FHC/L/CS/1710/2013: Kasmal International Limited v Central Bank Nigeria wherein a different Judge of Federal High Court held that stamp duty of N50 was payable on every deposit or fund transfer of N1,000 and above; and that the CBN and Deposit Money Banks (“DMBs”) were obliged to implement the deduction. It was on the strength of this decision that the CBN issued its Circular directing all DMBs to deduct N50 as stamp duty from every deposit above N1,000 in receiving accounts.
For the Federal Government of Nigeria (“FGN”), stamp duty is another non-oil revenue to shore-up its declining revenues from crude oil. The FGN has in more recent times focused on efforts to increase its revenues from taxes (excluding the oil-based petroleum profits tax). We consider the CBN Circular to be a calculated step to shore up another stream of non-oil revenue for the FGN. It is irrelevant that the stamp duty was not being collected by the Federal Inland Revenue Service.
With the setting aside of the Circular there may have come some kind of relief to Nigerians who may have disagreed with the CBN Circular. It is however important to note that the benefits of the judgment in the Suit inures only to the Plaintiff. Hence no one else can directly benefit from the judgment as it was not a class action. However, we consider that this decision may trigger class actions on this issue in other to effectively restrain all the Nigerian banks from giving effect to the Circular which has now been declared by the Court as illegal, null and void and of no effect whatsoever.
Further and for good order, it may be appropriate for the CBN to issue another circular to all DMBs appraising them of the latest judgment of the Court and either stopping all together the collection of stamp duty by the DMBs where it agrees with the decision of the Court, or suspending the collection of the stamp duty, where it intends to challenge the decision of the Court. Where the CBN agrees with the decision of the Court, the CBN may need to be set monies aside to refund all monies that were illegally collected as stamp duty during the subsistence of the Circular.