Nigeria’s foreign exchange (FX) inflows are under threat as some United States lawmakers have introduced a bill proposing a 5% remittance tax.
The 5% remittance tax bill was introduced by the Republican caucus in the U.S. House of Reps and was said to be part of President Donald Trump’s sweeping fiscal agenda.
The bill, if passed could disrupt the flow of diaspora remittances that has been critical to Nigeria’s economy.
Pan-Atlantic Kompass reports that diaspora remittances have been a cornerstone of Nigeria’s economy, second only to oil exports in FX earnings.
Additionally, many individuals in the country depend on their relatives abroad for funds for feeding and education, among other things.
The World Bank had reported that Nigeria received $20bn in remittances in 2023, representing about 35% of the country’s total remittance inflows, though down 2.9% from $21bn in 2022.
Also, the Central Bank of Nigeria (CBN) recorded $4.22 billion in official remittance inflows from January to October 2024, a 9% increase year-on-year and the highest in five years.
The United States, home to over 5 million Nigerians, is the largest source, with global U.S. remittance outflows reaching $79 billion in 2022, according to the International Organisation for Migration.
The proposed 5% remittance tax could reduce the net value of these funds, straining household budgets in Nigeria that depend on remittances for essentials like healthcare, education, and daily expenses.
The bill, outlined in a House Republican draft released on May 12, 2025, proposed that the 5% tax on remittance transfers would be payable by the sender in the U.S. and remitted quarterly to the U.S. Treasury.
Verified U.S. citizens are exempt and can claim the tax as a refundable credit, but non-citizens, including legal immigrants, will bear the cost.
The 5% remittance tax would be collected at the time of transaction, directly by banks and financial services like Western Union, PayPal, and wire transfer services.
It was gathered that the bill is aimed at raising revenue for making the 2017 Tax Cuts and Jobs Act permanent, extending the child tax credit through 2028, and funding border security initiatives.
This tax applies to Green card holders, Temporary visa holders (H-1B, H-2A, H-2B, F-1, etc.), Non-Resident Indians (NRIs), and other foreign workers or non-citizens living in the U.S.
It was also gathered that the bill, which was introduced on the floor of the House of Representatives on May 12, 2025, is expected to be approved by the House on May 26, 2025, while Trump’s signature on the bill is expected to happen on July 4, 2025.
If passed, the tax could take effect almost immediately, with financial institutions implementing the levy on all international transfers.
