US 5% Remittance Tax Threatens Nigeria’s Foreign Exchange Inflow
Nigeria’s economy faces fresh uncertainty as the US Congress considers a bill to impose a 5% tax on diaspora remittances, potentially impacting over $20 billion in annual FX inflows into the country.
The bill, introduced by House Republicans, proposes that the tax be paid by senders of remittances, collected quarterly by the US Treasury Department. However, verified US citizens would be exempt from the tax and eligible for credits. Remittances through authorized providers by verified senders are also excluded.
A key vote on the bill is expected before May 26, following a committee vote already held. The development has raised alarms in Nigeria, which ranks ninth globally in remittance receipts, according to the International Organization for Migration, with inflows of $20.1 billion in 2022.
💬 Expert Reactions:
Muda Yusuf – Centre for the Promotion of Private Enterprise (CPPE):
“This will negatively impact Nigeria’s forex inflow. Remittances contribute over $20 billion annually to our reserves. A US tax could reduce these inflows significantly.”
Tunde Abidoye – FBNQuest Merchant Bank:
“This tax could reduce remittances and shrink household disposable income, ultimately lowering consumption and economic activity in Nigeria.”
David Adonri – Highcap Securities:
“A drop in remittances will affect the value of the Naira and Nigeria’s fiscal budget, as diaspora funds are critical to our external reserves.”
Tajudeen Olayinka – Investment Banker:
“The 5% charge might discourage money transfers, reducing the gross remittance volume and affecting developing nations like Nigeria.”
Olatunde Amolegbe – Former CIS President:
“Our policymakers must assess the bill’s impact and create strategies to cushion the economic effects swiftly.”
Clifford Egbomeade – Communications Analyst:
“Any drop in remittances will ripple across the economy, especially for millions of Nigerians relying on diaspora support for essentials like food, health, and education.”
📊 Why This Matters:
The proposed tax could discourage transfers, reduce FX availability, and deepen economic strain.
Diaspora remittances are Nigeria’s second-largest FX source after crude oil.
The Central Bank of Nigeria (CBN) recorded a 9% rise in remittance inflows to $20.98 billion in 2024.
IMTO inflows surged by 43.5% to $4.73 billion.
