In a bid to bolster local employment opportunities and increase revenue, Nigeria has announced the implementation of a mandatory annual levy targeting organizations employing expatriate workers.
Under this new regulation, companies are required to pay $15,000 for directors and $10,000 for other expatriate employees.
The initiative aims to incentivize foreign companies to hire more Nigerian workers, aligning with President Bola Tinubu’s vision of balancing employment opportunities between Nigerians and expatriates. Tinubu emphasized this objective during the launch of the Expatriate Employment Levy (EEL) handbook, cautioning against any misuse of the levy to deter potential investors.
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“The goal is to close wage gaps between expatriates and the Nigerian labor force while increasing employment opportunities for qualified Nigerians in foreign companies in the country,” he said.
According to reports citing data from the interior ministry, Nigeria hosts more than 150,000 expatriates, primarily working in sectors such as oil and gas, construction, telecommunications, and hospitality. Nigeria, being one of Africa’s largest oil producers, relies heavily on oil and gas exports, which constitute 90% of its foreign exchange earnings, as noted by the International Monetary Fund.
This move supplements the existing requirement for companies to pay $2,000 annually for residency permits per foreign employee. However, economists are expressing concern about the potential repercussions on investor confidence.
According to the new controversial methodology adopted by the NBS, Nigeria’s unemployment rate surged to 5.0 percent in the third quarter of 2023 from 4.2 percent in the previous quarter, as indicated by the latest Labour Force Survey. The report from the National Bureau of Statistics also revealed that the labor force participation rate among the working-age population declined to 79.5 percent in Q3 compared to 80.4 percent in Q2.
While the levy seeks to address employment disparities and generate revenue amidst Nigeria’s economic challenges, concerns linger regarding its impact on investor sentiment. Economists fear that the levy could deter foreign investment, exacerbating the nation’s economic woes.
They say while the intention behind the levy is noble, its implementation may inadvertently deter foreign investment, particularly at a time when Nigeria is grappling with economic instability.
But Nigerian economist Abubakar Abdullahi holds a positive outlook, stating that the levy could benefit Nigeria by prompting companies to explore local talent. “I believe Nigeria stands to benefit from this levy as more companies will start looking inwards as there are qualified Nigerians from all sectors,” Abdullahi remarked.
Investor confidence is crucial for Nigeria, especially amid its worst economic crisis in recent history. Widespread hardship and discontent have fueled protests and demonstrations by labor unions and government workers, underscoring the urgency of economic revitalization efforts.
In response to these challenges, President Tinubu reassured Nigerians of ongoing efforts to stabilize the economy and improve financial prospects. However, striking a delicate balance between promoting indigenous employment and sustaining investor confidence remains a formidable task for Nigerian policymakers.
The success of the Expatriate Employment Levy hinges on effective enforcement mechanisms.
Enforcement of the levy falls under the jurisdiction of the Nigerian Immigration Service, with Interior Minister Olubunmi Tunji-Ojo indicating that it will operate under a public-private partnership model involving the government, immigration service, and a private firm.
Collaborative efforts between the government, immigration services, and private entities are said to be essential to mitigate concerns raised by investors and ensure the levy’s contribution to Nigeria’s economic development.
Experts have warned that policymakers must tread cautiously as Nigeria navigates through its economic turmoil, considering the nuanced implications of regulatory measures on investor sentiment and domestic employment dynamics. They said Finding a harmonious equilibrium between these competing priorities will be instrumental in steering Nigeria toward sustainable economic growth and prosperity.