A proposed U.S. invoice to impose a 5% tax on all outbound remittance transfers from non-citizens may divert as a lot as $2.8 billion from Sub-Saharan African economies in 2025, threatening one of many area’s most secure sources of international change. Nigeria, Ghana, and Kenya stand to be among the many hardest hit.
“The One Huge Lovely Invoice,” backed by President Donald Trump, would apply a 5% levy on worldwide cash transfers made by all non-citizens within the U.S., together with inexperienced card holders and momentary visa holders. U.S. residents could be exempt. The invoice, now advancing within the Home of Representatives, is predicted to be voted on Could 26, with a doable signing into regulation by July 4, 2025.
The proposed tax will probably be deducted on the level of switch and remitted quarterly to the U.S. Treasury. Beneath this coverage, a $400 remittance switch could be topic to a $20 withholding payment. For people sending $400 every month, this tax would add as much as $240 over a 12 months.
For African international locations, the place remittances fund schooling, healthcare, and enterprise investments, the proposed payment may set off a ripple impact throughout economies already fighting excessive inflation and low international direct funding.
Who’s most affected?
African nations, significantly these with massive diaspora communities in america, will probably be considerably affected by this proposal. The U.S. Census Bureau knowledge launched in April 2024 says the U.S. hosts about 46.2 million immigrants, which makes up virtually 14% of the U.S. inhabitants. Sub-Saharan African immigrants make up over 5% of the U.S. immigrant inhabitants, with Nigeria having the biggest quantity as of 2019, with international locations like Ethiopia, Ghana, Kenya, and Somalia. These communities rely closely on remittances from their abroad populations to help family incomes, fund schooling, and drive native investments.
As an example, Nigeria’s remittance acquired in 2024 reached practically $20 billion-making remittances one of many nation’s most secure sources of international change. Nigeria’s financial system is extremely depending on these inflows, which regularly surpass international direct funding. Egypt has the very best remittances, nevertheless most of them come from the gulf international locations, as most of its diasporan inhabitants relies there.
Broader implications
Kahuna, a Tanzanian residing within the U.S., informed TechCabal that if the invoice is utilized, she foresees lowered remittance flows with U.S. diasporan communities sending much less cash house as a result of added value on prime of switch charges. For instance, Western Union charges vary from $5 to $20, with sooner transfers costing extra. These extra charges will drive many migrants to go for unlawful, casual channels.
“It must be fascinating to see how this evolves, however by the way in which issues are, it could possible go,” Kahuna, who requested to be recognized by her first title, mentioned.
“The adjustments which have been occurring within the U.S. as of late have compelled us to query our roles as Africans,” mentioned Pleasure, a Nigerian residing within the U.S. “If this remittance Invoice is handed, we should discover extra options of sending cash house and even simply spend money on companies that might generate cashflow for household help.”
Yavi Madurai, the President of African Prosperity Fund, an infrastructure initiative sponsored by the African Continental Free Commerce Space (AfCFTA) Secretariat, informed TechCabal that the proposed tax on remittances threatens to disrupt a vital monetary lifeline for tens of millions of African households. Whereas the coverage targets U.S. home considerations, its ripple results may undermine financial resilience and monetary inclusion throughout Africa.
“These funds are extra than simply revenue; they help schooling, well being care, housing, and small enterprise improvement,” she mentioned. “They function social security nets in lots of communities throughout Africa.”
Sub-Saharan Africa is projected to obtain roughly $54 billion in remittances in 2025, and a 5% tax may divert as much as $2.8 billion away from recipient households if a major share comes from non-citizen US residents. Madurai famous that many small companies in Africa are financed by way of remittances. A lower in these funds may sluggish entrepreneurship and job creation.
“Blanket remittance tax dangers lowering switch volumes, growing informality, and disproportionately affecting low-income households,” she mentioned. “The poor are going to be impacted probably the most. Furthermore, it undermines international commitments to cut back remittance prices underneath SDG 10.”
Remittance startups like NALA and LemFi might face elevated regulatory burdens, as they might be required to confirm the citizenship standing of senders earlier than processing transactions. This might result in greater operational prices and potential disruptions in remittance providers, additional complicating the monetary panorama for migrant employees.
The coverage—a part of Trump’s broader marketing campaign to limit immigration—may open new diplomatic rifts between Washington and African capitals. Analysts say the African Union and affected governments should have interaction U.S. lawmakers urgently.
Madurai famous that African governments ought to urgently provoke a coordinated diplomatic response by way of the African Union and have interaction US lawmakers to hunt exemptions or waivers for least developed or closely remittance-dependent international locations. Concurrently, they need to work on regional remittance harmonisation and strengthen monetary sovereignty by way of digital monetary innovation.
“Now’s the time to entry the expertise and technological developments now we have on the continent,” mentioned Madurai.
The invoice’s progress will probably be carefully watched over the approaching weeks.