Nigeria’s foreign exchange earnings from diaspora remittances may suffer a major blow following the passage of a new bill in the United States that seeks to impose a 3.5 per cent tax on money transfers sent by non-citizens to recipients abroad.
The provision is contained in the “One Big Beautiful Bill Act,” a sweeping legislative package by US President Donald Trump and recently passed by the US House of Representatives.
If enacted into law, the remittance tax will apply to all international money transfers made by individuals who are not US citizens, including green card holders and temporary visa recipients. The tax is expected to be deducted at the point of transaction by banks and remittance platforms and remitted to the US Treasury on a quarterly basis.
Also, the tax will affect even the smallest of transfers and could significantly alter the behaviour of senders. Nigeria, one of the top recipients of remittances globally, is expected to be among the hardest hit.
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Although it is not currently clear what portion of the remittance comes from the US, Nigerians in the United States were estimated to have sent over $6bn home based on available research as of 2015.
The new tax, if enforced, could discourage formal remittance transactions and push senders towards unregulated informal channels to avoid extra costs.
