Nigeria’s FX inflow faces threat as US considers taxing diaspora remittances

The tax would be paid by the sender and collected quarterly by the US Treasury Department.Verified US citizens would be exempted from the levy and could claim it as a credit. The Bill also exempts remittances sent via authorized providers by verified US senders.

Key vote on the Bill expected this week with a committee vote on the Bill already held yesterday. A full House vote is expected before May 26.

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For decades, the United States has consistently been the top remittance-sending country. According to the International Organisation for Migration, the US accounted for a total outflow of $79 billion in 2022, followed by Saudi Arabia ($39 billion), Switzerland ($31.9 billion), and Germany ($25.6 billion).

Within the same period, Nigeria emerged on the top ten remittance recipient in the world, ranking the number nine with $20.1 billion behind countries like India ($111.2bn), Mexico ($61.1bn), China ($51bn), Philippines ($38bn), France ($30bn), Pakistan ($29.9bn), Egypt and Bangladesh with $28.3bn and $21.5 bn respectively.

However, economy analysts, who spoke to Vanguard on the development, noted that the Bill if passed by

the US lawmakers, would result in decline in net value of remittance inflow into the country and may lead to further drop in the value of the Naira.

While the proposed tax broadly affects immigrant families, it poses a challenge for the country as remittances from the Nigerian diaspora have become a major mainstay of the country’s economy. At the macro level, diaspora remittances represent the second-largest source of foreign exchange inflow into the country, second only to crude oil earnings.