Nigeria’s foreign exchange earnings from diaspora remittances face a looming threat as the United States edges closer to enforcing a new tax on international money transfers made by non-citizens. A controversial provision in the sweeping “One Big Beautiful Bill Act,” recently passed by the US House of Representatives under the leadership of former President Donald Trump, proposes a 3.5 per cent levy on outbound remittances.
If enacted, this tax will apply to all non-citizens in the US — including green card holders and temporary visa residents — and be deducted at the point of transaction by banks and remittance platforms. The funds will be paid to the US Treasury quarterly, with no exemption for low-income or small-value transfers.
Nigeria Among Most Exposed Economies
Nigeria, which received $20.93 billion in personal remittances in 2024 — the highest in five years — is among the most vulnerable nations, according to the Centre for Global Development. The proposed levy could result in up to $215 million in lost remittance value annually, a potentially severe blow to millions of households that rely on foreign support.
The United States remains a top source of Nigerian remittance inflows, with estimates showing Nigerians in the US sent over $6 billion home in 2015 alone. Analysts say the new tax could discourage formal transfers, pushing senders toward unregulated informal channels that could undermine Nigeria’s financial system.
Economic Repercussions for Nigeria
Experts warn that the tax could negatively impact Nigeria’s foreign exchange reserves, increase pressure on the naira, and worsen the country’s already precarious balance of payments. Charles Sanni, CEO of Cowry Treasurers Limited, described the move as a “double taxation” for migrants who already pay income tax and now face additional charges on family support.
“This policy discourages outflows as the US pursues an 'America First' strategy. The result? Reduced remittance inflows and increased reliance on unofficial channels,” Sanni warned.
With diaspora remittances serving as a financial lifeline for millions of Nigerian families, the Central Bank of Nigeria has taken proactive steps. In April, it launched the Non-Resident Bank Verification Number (NRBVN) platform, allowing Nigerians abroad to obtain their BVN without visiting Nigeria — a key policy shift aimed at boosting monthly remittances to $1 billion.
However, the tax threatens this goal.
“With this bill, that $1bn target could become a mirage,” Sanni lamented.
Wider Impact on Africa, Remittance Startups, and the Informal Economy
Africa received $94.8 billion in diaspora remittances in 2023, with Nigeria and Egypt accounting for nearly half. Startups operating in the digital payment and remittance space may be hardest hit if users migrate to crypto platforms, informal brokers, or peer-to-peer channels to avoid taxes.
A report by Barclays Bank noted that the bill would add operational complexity, especially for firms with undocumented clients or users reluctant to share citizenship status.
“Verification requirements and transaction taxes will disrupt retail channels and incentivise a parallel financial ecosystem,” Barclays warned.
Boniface Chizea, CEO of BIC Consultancy Services, echoed concerns over a rising underground economy. He said the policy might not directly impact oil earnings — Nigeria’s main foreign exchange source — but will worsen the trade balance and reduce liquidity in formal financial systems.
Experts Call for Domestic Revenue Alternatives
Prominent economist Professor Akpan Ekpo stressed the urgency of diversifying Nigeria’s domestic revenue streams.
“The US wants to boost its internal revenue, but this move will hit countries like Nigeria the hardest. We must now look inward — remittances help families survive, especially during economic hardship,” he said.
Others warned that the policy could shift investment preferences of Nigerians abroad. “Investors will redirect their funds to low-tax jurisdictions,” said Sanni.
A Risky Shift to Unregulated Transfers and Crypto
Manuel Orozco, Director of the Migration, Remittances, and Development Program at the Inter-American Dialogue, warned of potential abuse of informal channels, including crypto wallets, peer-to-peer cards, and backend processors, which may open the door to money laundering.
“This bill may encourage illegal fund transfers using unregulated platforms and debit cards shared across countries. These loopholes are vulnerable to exploitation,” he warned.
Conclusion: A Cautionary Crossroads
As Nigeria works to stabilise its foreign exchange market, fight inflation, and reduce poverty, a reduction in formal remittances could derail progress. Analysts are urging the Nigerian government to:
- Engage in diplomatic lobbying to protect diaspora flows,
- Strengthen regulatory oversight of fintech and remittance platforms,
- Expand domestic revenue-generating sectors, especially oil and gas,
- And explore policy buffers to mitigate foreign policy shocks.
For now, millions of Nigerian families may brace for leaner transfers — and tougher times.
