A new bill introduced by US Republican lawmakers seeks to impose a 5 percent excise tax on all remittances sent outside the United States, a move that could significantly affect millions of Nigerian families dependent on diaspora inflows.
The draft legislation, unveiled Monday, aims to target remittances by non-citizens in the US, stating: “There is hereby imposed on any remittance transfer a tax equal to 5 percent of the amount of such transfer.” The proposed law will require senders to remit the tax quarterly to the US Treasury.
While payments from verified US citizens will be exempt and eligible for tax credits, the bill would apply broadly to undocumented immigrants and other foreign nationals living in the US.
Nigeria is expected to be among the hardest-hit countries. According to Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, diaspora remittances through international money transfer operators (IMTOs) reached $4.22 billion between January and October 2024, with a significant portion presumed to have originated from the US.
The CBN has not specified how much of that total came from the United States, but analysts say a 5 percent cut could translate into millions of dollars lost annually to Nigerian recipients.
The tax plan is part of a wider pattern of policy changes under the current US administration. In January, the US Immigration and Customs Enforcement (ICE) announced plans to deport nearly two million undocumented immigrants. Simultaneously, former President Donald Trump floated proposals to end birthright citizenship for children of illegal immigrants.
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Also in March, Trump announced sweeping tariff hikes, including a 14 percent duty on Nigerian imports. In a related trade move, the US and China recently reached a deal to ease tensions by slashing mutual tariffs.
Under the agreement, US tariffs on Chinese goods dropped from 145 percent to 30 percent, while Chinese tariffs on US goods fell to 10 percent from 125 percent.
For many Nigerians, however, the proposed 5 percent remittance tax threatens to undermine the financial support lifeline provided by relatives abroad. Critics say the measure could discourage formal money transfers and push remittance flows into underground channels.
As the bill advances through Congress, its potential impact on Nigeria’s economy, families, and foreign reserves is already sparking concern among policymakers and diaspora groups alike.