Nigeria’s new expatriate levy raises more concerns about foreign investment flow

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In a move that has raised concerns among foreign investors, Nigeria recently implemented a new expatriate employment levy, prompting the Manufacturers Association of Nigeria to warn that it could discourage foreign investment.

The levy, announced by President Bola Tinubu, requires companies to pay $15,000 annually for the employment of every foreign worker at the director level and $10,000 for workers on other levels.

The Manufacturers Association of Nigeria criticized the levy as an “unwarranted and unprecedented addition to the cost of doing business,” which is perceived as a punishment for foreign investors and local companies employing needed foreign nationals.

The industry group believes the levy will deter multinational companies from investing in Nigeria or establishing regional headquarters in the country.

Scheduled to take effect from March 15, the expatriate employment levy is intended to promote skills transfer, knowledge sharing, and balanced economic growth, according to the government.

However, critics argue that it will have adverse effects, significantly impacting the expatriate population in Nigeria and discouraging much-needed foreign direct investment.

The move comes when Nigeria has witnessed the departure of several global conglomerates, including Procter & Gamble, GSK Plc, Bayer AG, and Sanofi SA.

The country faces a foreign exchange crisis and declining purchasing power, driven by runaway inflation that has eroded incomes.

While the expatriate levy could contribute to government revenues, analysts caution that it may do more harm than good by impeding the inflow of foreign investment crucial for economic growth.

Adewale Ajayi, an analyst at KPMG, emphasized the importance of finding the right balance between revenue generation and economic growth.

“While the expatriate levy would boost the government revenues, it will do more harm than good by significantly impacting the expatriate population in Nigeria and discouraging the inflow of the much-needed foreign direct investment required to drive growth,” Ajayi said.