Nigeria’s foreign exchange earnings from diaspora remittances could take a major hit following the U.S. House of Representatives' passage of the “One Big Beautiful Bill Act” — a legislative package championed by former U.S. President Donald Trump. The bill includes a proposed 3.5% tax on all international money transfers sent by non-U.S. citizens, including green card holders and temporary visa recipients.
If signed into law, the tax will be deducted at the point of transaction by banks and remittance platforms and remitted quarterly to the U.S. Treasury. With no exemptions, even small remittances will be affected — a development that could impact Nigeria significantly, as the country received $20.93 billion in remittances in 2024 alone, according to the Central Bank of Nigeria (CBN). This represents the highest level in five years and remains a vital source of foreign exchange for the country.
Widespread Impact Expected
The Centre for Global Development has listed Nigeria among the top 10 countries likely to be worst hit, alongside Mexico, India, China, and the Philippines. The group estimates Nigeria could lose about $215 million annually in remittance value if the bill becomes law.
Research shows that Nigerians in the U.S. alone sent over $6 billion in remittances as of 2015. Experts warn that this new levy may push senders to avoid formal channels, resorting instead to unregulated methods to save costs.
Diaspora Remittances Vital to Nigerian Economy
Africa received $94.8 billion in diaspora remittances in 2023, with Nigeria and Egypt accounting for nearly half of the total, according to Agusto & Co. The report highlights how such funds support household consumption and contribute significantly to Nigeria’s foreign reserves and economic stability.
Although the tax targets only non-citizens, about 47.8 million immigrants reside in the U.S., many of whom send money to their home countries. The mandatory deduction may discourage frequent transfers, disrupt household incomes in Nigeria, and hurt startups operating in cross-border payments.
Barclays Bank analysts noted that the bill also mandates remittance companies to verify and report users’ citizenship status, adding operational complexities and costs that may affect cash-based retail transactions.
CBN Initiative Threatened
The development comes amid CBN’s efforts to boost formal remittance inflows. Recently, the CBN launched the Non-Resident Bank Verification Number (NRBVN) platform in partnership with the Nigeria Inter-Bank Settlement System, enabling Nigerians abroad to obtain BVNs remotely. The apex bank had set a monthly remittance target of $1 billion, which now appears threatened by the proposed U.S. policy.
CBN Governor Olayemi Cardoso expressed optimism about the initiative: “With the introduction of NRBVN and complementary policy measures, we are optimistic about achieving our ambitious target of $1bn in monthly remittance flows.”
Experts Warn of Consequences
Charles Sanni, CEO of Cowry Treasurers Limited, warned that the tax could significantly reduce remittances to Nigeria, weaken the naira, and deepen economic pressure. He noted that double taxation — salary tax and remittance levy — will discourage formal transfers.
Sanni added: “Senders will turn to unofficial channels, hurting Nigeria’s reserves. This could also lead to a rise in cross-border operators using stablecoins and crypto wallets, risking increased money laundering.”
He further noted that the reduced inflows may force the government to plug revenue gaps with taxes, loans, or asset sales. “Our debt servicing burden could worsen without diaspora dollars,” he said.
Ripple Effects on Investment and Regulation
Boniface Chizea, CEO of BIC Consultancy Services, warned that the tax could worsen Nigeria’s trade balance and boost underground economic activity. He called on the government to secure the crude oil sector to safeguard export revenue.
Renowned economist Prof. Akpan Ekpo echoed similar concerns, saying, “This tax will reduce official remittance flows and increase illegal ones — a dangerous development in an already struggling economy.”
Potential for Regulatory Loopholes
Manuel Orozco, Director at the Inter-American Dialogue, noted that the law could push migrants toward unregulated platforms like crypto wallets and debit cards shared across borders. He warned that such alternatives, though convenient, could evade oversight and encourage money laundering.
“Increased demand for unauthorised channels will lead to new platforms that operate outside existing regulations,” Orozco cautioned. “The risk is not only economic — it's regulatory and security-based.”
As Nigeria navigates foreign exchange volatility, inflation, and economic reforms, the proposed U.S. remittance tax presents a new external threat with potential domestic consequences for millions of families relying on funds from abroad.
