European Union: Of Brexit, The New Foreign Exchange Policy, Tax And You

Last Updated: 1 August 2016
Article by Taiwo Oyedele

How The Recent Developments And Events Of The Coming Months In The Local And Global Environment Will Impact You And Your Tax.

The Brexit vote has not only shocked the EU and the rest of the world, it also left many citizens and residents of the United Kingdom themselves "fantastically stunned". It is not surprising that millions of British people have now signed a petition requesting for another referendum.

There have been significant events in the local and international space in the past few days. Most notable locally is the new exchange rate policy of the Central Bank of Nigeria (CBN) and internationally, the referendum by Great Britain to leave the European Union (EU). Both key developments have impact on Nigeria, albeit to varying extent. I have attempted to highlight some of these impacts in this article.

The Brexit Referendum

On Thursday 23 June 2016, citizens of the United Kingdom (UK) voted in a referendum either to leave or remain in the European Union (EU). In a most shocking outcome, over 17 million, precisely 17,410,742 or 52% out of the total 33,551,983 voters voted to leave the EU compared to 16,141,241 or 48% that voted to remain.

Since the outcome of the referendum, the very first exit by any country since the EU was established has got the whole world wondering what would happen next and the implications not only to the UK and the EU but also the rest of the world. The Brexit vote has not only shocked the EU and the rest of the world, it also left many citizens and residents of the United Kingdom themselves "fantastically stunned". It is not surprising that millions of British people have now signed a petition requesting for another referendum. Whatever happens next, one thing is certain - that Great Britain and the EU will no longer remain the same.

The impact will be far reaching. Over USD 2 trillion has been wiped off global capital markets across all continents. This means less value for pension and retirement plans with investments in those markets. Other issues range from reconfiguration of the single market, renegotiation of trade agreements, immigration and labour law, functions and so on. As a result of the uncertainty created by the exit vote, the market has perhaps over-reacted as the British Pound depreciated by about 10% within 24 hours, the worst in over 30 years. In the medium to long term, the exchange rate to other major currencies will probably recover but likely to be lower than pre-referendum levels for some time. For Nigeria, there will be minimal impact. Nigerians studying in the UK will need relatively less Naira to pay their fees. Those travelling to the UK for business and vacation will also find it slightly more affordable.

In terms of importation from the UK, this will become cheaper for Nigerians while exports to the UK will become more expensive and therefore less attractive. British businesses in Nigeria will be relatively more valuable to their UK group both in terms of their returns on investment and consolidation value in Sterling.

The monies stolen from Nigeria and stashed away in the UK by some politicians will be of less value than if the funds had been recovered prereferendum. We may have to renegotiate the double tax treaty between Nigeria and the UK if Brexit triggers a leave vote by any of its territories such as Scotland.

Businesses do not like uncertainties and this is the main reason for the currency devaluation while various rating agencies have either downgraded or are considering downgrading Britain and even though nothing has really changed after the election. The actual exit could still take about 2 years. Where possible, governments must address all controllable uncertainties as much as possible from macro-economic policies, fiscal direction and so on.

In the Economic Community of West African States (ECOWAS), which was established in 1975, Mauritania pulled out of the Union in December 2000 without any fanfare and no noticeable impact. This is largely due to the fact that ECOWAS has not really fully integrated and taken off. The Common External Tariff within ECOWAS was only agreed in 2015, forty years after the Union was formed. Also, the size of the UK economy and its influence on the global stage makes it completely different and unprecedented.

And what about the new foreign exchange policy?

The Central Bank of Nigeria recently announced a change in foreign exchange policy from the fixed official rate to a floating exchange rate which is largely market driven. Based on the 2016 Budget, a benchmark exchange rate of N197 to the USD was used in estimating government revenue. With the exchange rate now around N281, government will get about 40% more from its dollar revenue. This will help cushion the impact of decline in oil revenue as a result of the crisis in the Niger Delta and hopefully also help reduce the planned deficit funding of N2.2 trillion in the Budget.

State governments will also get more revenue to share in Naira terms from federal allocation to improve the dire financial position of the states especially given that 27 of the 36 states are reported to be defaulting on salary payments as at the end of May 2016.

In a similar fashion, import duties and VAT on importation should significantly improve partly due to the higher exchange rate being used to calculate payments and also because of the improved liquidity in the foreign exchange market which should result in more importation. Also, it is expected that there will be more inflows of foreign direct investments, foreign portfolio investments and diaspora remittances which will improve economic activities and consequently the country's tax base and tax take.

So what's next?

Investors and businesses do not like uncertainties. Unfortunately there will always be uncertainties in any economy but savvy investors learn to manage rather than avoid uncertainties. However, uncertainties that are self-inflicted should be avoided as they not only discourage some investors, they also necessitate a risk premium for investments to be viable. As a country we can do very little or nothing to control the price of crude oil, we had no control over Brexit vote, and we will not be able to control whether Donald Trump wins American's election but we can, for instance, control the uncertainties created by our failure to pass the Petroleum Industry Bill, inability to fully deregulate the downstream sector, registering property, ease of doing business, and the uncertainties around fiscal and industrial policies.

Government must strive to reduce uncertainties to attract both domestic and foreign investments.

Businesses that wish to play in this market need to plan for the long run but also must be sufficiently agile to respond quickly and efficiently to unplanned changes which they will inevitably encounter. Either way, Africa and Nigeria in particular continues to be an attractive market for discerning investors who will gain an advantage for moving in earlier than those who wait until they get more certainty, which may be a very long wait.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Taiwo Oyedele
In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions