NIGERIA: Employers Must Pay Hefty Tax on Every Expat Worker

In this iPMI Global regional country guides article, iPMI report author and market analyst Ian Youngman, takes a look at news, that Nigeria has imposed a mandatory annual levy for organisations employing expatriate workers, requiring them to pay USD15,000 (£12,000) for a director and USD10,000 for other employees.

• Nigeria has imposed a mandatory annual levy for organisations employing expatriate workers, requiring them to pay USD15,000 (£12,000) for a director and USD10,000 for other employees.
• The move is meant to encourage foreign companies to employ more Nigerian workers.
• Staff at diplomatic missions and government officials will be exempt.
• There is the question of why a government levy is fixed in foreign currency and not in the Nigerian Naira.
• This is designed to guard against regular adjustment of the levy amount in view of the current high inflation rate and the depreciation of the local currency against the US dollar.
• The levy applies to employees who work for at least 183 days in a year.
• The scheme imposes fines of up three years and jail terms of up to five years for a person or organisations that do not comply, including failure to provide accurate information.
• The Nigerian Immigration Service will be responsible for enforcing the levy.
• The Expatriate Employment Levy (EEL) is a government-mandated contribution imposed on organisations that engage expatriate workers in Nigeria, subject to certain exemptions.
• The EEL will serve as a mandatory document like a passport.
• Every eligible expatriate will be required to present the EEL card at the time of exit and entry into Nigeria.

The Nigerian economy

• Nigeria is experiencing its worst economic crisis in a generation.
• A litre of petrol costs more than three times what it did nine months ago, while the price of the staple food, rice, has more than doubled in the past year.
• These two figures highlight the difficulties that many Nigerians are facing as wages have not kept up with the rising cost of living.
• The average rate at which prices go up, is now close to 30% - the highest figure in nearly three decades. The cost of food has risen even more - by 35%.
• However, the monthly minimum wage, set by the government and which all employers are supposed to observe, has not changed since 2019
• While global issues are blamed the main factor is local changes such as the end of the long-standing fuel subsidy.
• The subsequent huge jump in the price of petrol has caused other prices to rise as companies pass on transportation and energy costs to the consumer.
• Complex economic mistakes have led the naira's value to plunge by more than two-thirds,
• As the naira is worth less, the price of all imported products has gone up.
• The state argues that in the long run it is making Nigeria's economy stronger.
• The system will be operated on a public-private partnership model between the government, the immigration service and a private firm.
• Nigerian economist Abubakar Abdullahi says the levy is good for the country and won't frustrate potential investors as" Nigeria stands to benefit from this levy as more companies will start looking inwards as there are qualified Nigerians from all sectors.

What happens next?

• The effective date of implementation of the EEL is 15th March 2024 and employers have until 15th April 2024 to comply.
• It may discourage companies from hiring expats.
• Expats may avoid Nigeria as prospects look better elsewhere.
• The Expatriate Employment Levy (EEL) handbook explains that the aim is to balance employment opportunities between Nigerians and expatriates.
• The goal is to close wage gaps between expatriates and the Nigerian labour force while increasing employment opportunities for qualified Nigerians in foreign companies in the country.
• There are more than 150,000 expatriates in Nigeria, according to the interior ministry.
• They mostly work in the oil and gas, construction, telecommunication and hospitality sectors.
• Nigeria is one of Africa's biggest oil producers. Its oil and gas exports account for 90% of foreign exchange earnings. 
• It already costs companies in Nigeria $2,000 a year to obtain a residency permit for each foreign employee.
• There is confusion between numbers on immigrants and expats- most immigrants are from Africa.
• Information is scarce but the probability is that there are now far fewer Western expats from Europe and the USA than before.
• The IPMI potential seems slim.

About the Author

Ian Youngman is an independent writer and researcher specialising in insurance. He writes regularly for a variety of magazines, newsletters, and on-line services. He publishes a range of market reports, and undertakes research for companies. To read his latest report, International Health Insurance 2023, please click here, or visit the REPORTS section of iPMI Global.