New US Bill Targets Non-Citizen Remittances
A major blow may be dealt to Nigeria’s foreign exchange earnings as a new U.S. bill proposes a 3.5% tax on international remittances sent by non-citizens. The legislation, named the “One Big Beautiful Bill Act”—a comprehensive policy package by President Donald Trump has passed the U.S. House of Representatives and is now awaiting further legislative action.
The proposed tax would apply to all non-citizens, including green card holders and temporary visa recipients, impacting every dollar transferred to families abroad.
Nigeria Among Hardest Hit by Proposed Tax
Nigeria, which received $20.93 billion in personal remittances in 2024, stands to lose as much as $215 million annually if the bill becomes law. According to the Centre for Global Development, Nigeria is among the top 10 countries most vulnerable, alongside Mexico, India, China, and the Philippines.
While exact figures on U.S.-Nigeria transfers remain unclear, historical data shows that Nigerians in the U.S. sent over $6 billion in remittances as of 2015. Experts warn that the tax could push many senders away from formal channels, disrupting Nigeria’s foreign reserves and household income streams.
Economic Ramifications for Nigeria
Pressure on Forex Reserves and Exchange Rates
According to Charles Sanni, CEO of Cowry Treasurers Ltd, the remittance tax could severely reduce inflows and encourage a shift to unregulated informal channels, weakening Nigeria’s foreign reserves.
“Remittances are critical for our balance of payments. Any decline will further pressure the exchange rate,” he warned.
Sanni also noted that senders will essentially face double taxation once on their income and again when remitting funds discouraging participation in formal channels.
Potential Impact on National Debt and Inflation
Sanni further predicted that the resulting revenue gap may push the Nigerian government to borrow more, increase taxes, or sell national assets, worsening the country’s debt servicing burden and inflation outlook.
“This could also trigger agitation for wage increases as households face reduced support from abroad,” he added.
Remittance Startups and Fintechs in the Crosshairs
Barclays Bank analysts noted that fintech companies facilitating cross-border payments will face major disruptions, particularly those with undocumented clients. The bill mandates remittance companies to verify and report the citizenship status of users, raising concerns around data privacy and compliance costs.
“In the short term, cash-based and retail channels will be the most disrupted,” Barclays said.
CBN’s Remittance Push Faces New Challenge
Just as the Central Bank of Nigeria (CBN) launched the Non-Resident Bank Verification Number (NRBVN) platform to boost diaspora remittances to $1 billion monthly, the proposed tax could derail those plans.
CBN Governor Olayemi Cardoso expressed optimism during the launch:
“We are optimistic about achieving our ambitious target… given the growing trust and convenience in formal remittance channels.”
Now, analysts warn that this target could be under threat, as senders seek tax-free alternatives.
Rise of Informal Channels and Crypto Transfers
Underground Economy at Risk of Expansion
Experts fear that a shift toward informal, unlicensed, or crypto-based channels could expose Nigeria to money laundering risks and loss of regulatory oversight.
Professor Akpan Ekpo, a renowned economist, noted that the reduction in official remittances will not only harm the economy but also increase reliance on illegal channels.
Boniface Chizea, CEO of BIC Consultancy Services, warned that the bill could worsen Nigeria’s trade balance and spur informal economic activity if not urgently addressed.
Crypto and Shadow Transfers on the Rise
According to Manuel Orozco of the Inter-American Dialogue, senders may increasingly resort to crypto wallets, shared debit cards, or unregulated processors.
He cautioned that demand for these channels could fuel the creation of unauthorised money transfer outfits, with possible links to money laundering and tax evasion.
A Call for Urgent Policy Action in Nigeria
Analysts unanimously agree that Nigeria must urgently diversify its foreign exchange sources, reduce dependency on diaspora inflows, and secure the crude oil sector.
“Now is the time to talk to Dangote Refinery and increase dollar inflows from crude derivatives,” Sanni urged.
As the Trump administration moves to enforce the remittance tax under the “America First” doctrine, Nigeria must act fast to protect the lifeline that diaspora funds provide to millions.
