By Sonny Iroche
A new bill passed by the U.S. House of Representatives is sending shockwaves across Africa. The legislation, part of President Donald Trump’s sweeping “One Big, Beautiful Bill” fiscal package, includes a 3.5% federal excise tax on money transfers sent abroad by non-U.S. citizens . If approved by the Senate, this unprecedented levy on remittances could siphon millions from communities in Nigeria, South Africa, Zimbabwe, Egypt, Morocco, Ghana, Kenya, Ethiopia, Rwanda, Sierra Leone and beyond – countries where money sent home by migrants in America is a lifeline for families and a pillar of national economies.
People walk past a currency exchange office advertising dollar services. Such remittance outlets may see fewer customers if a U.S. tax on money transfers is enacted, raising costs for diaspora senders.
A Lifeline in Jeopardy
Remittances – the funds immigrants send to relatives back home – form a vital stream of income across Africa. In 2024, total remittance inflows into African countries exceeded $92 billion , vastly outpacing foreign aid and approaching 5-6% of Africa’s GDP . The United States is the single largest source, accounting for at least $12 billion of those flows in 2024 . In fact, the U.S. is the top origin country for remittances worldwide, sending out over $656 billion globally in 2023 .
Many African nations count on these inflows for economic stability. Recent data suggests private remittances now outweigh both foreign aid and direct investment as financial inflows to the continent . “Remittances are the largest external financial flow into Africa at the moment,” notes Enoch Aikins, a Ghanaian political economist based in Pretoria . Unlike aid or loans, which often get whittled down by administrative costs, diaspora money transfers go directly to households, making an immediate impact on welfare . They cover essentials – food, housing, school fees, medical bills – and often arrive quickly in times of emergency .
People walk past a currency exchange office advertising dollar services. Such remittance outlets may see fewer customers if a U.S. tax on money transfers is enacted, raising costs for diaspora senders.
*Egypt’s share from U.S. is roughly one-third of its $28.3 billion total remittances .
Nigeria and Egypt are Africa’s top recipients of diaspora funds by sheer volume – $20–30 billion annually in recent years . Nigeria received $20.9 billion in 2024, the highest in five years , while Egypt’s inflows were about $28.3 billion in 2022 . For Nigeria, remittances have become a key source of foreign exchange, even rivaling oil revenues in some quarters. The Central Bank of Nigeria recorded a 9% rise in remittances from 2023 to 2024 and has been targeting over $1 billion in monthly diaspora inflows to boost dollar liquidity.
Other large African economies also depend on these funds. Morocco drew over $11.7 billion from its diaspora in 2024 (about 8.5% of GDP), mostly from Europe but also North America. Ghana saw remittances surge by 91% to $4.6 billion recently , now an important support for its current account and foreign reserves. Over 25% of Ghana’s remittances come from the U.S. . In Kenya, which received around $4.8 billion in 2024 , the United States is the top source – accounting for over half of diaspora inflows . Kenyan officials note these transfers now earn more foreign exchange than the country’s major exports like tea and horticulture , helping to keep foreign reserves adequate .
For smaller economies, remittances are an even greater lifeblood. Zimbabwe’s diaspora sent home about $3.1 billion in 2024 (over 11% of GDP) , propping up an economy battered by inflation. Liberia received roughly $800 million in 2024 equivalent to the entire national budget and nearly 20% of GDP . The Gambia, Somalia, Comoros, Lesotho, and Liberia rank among the most remittance-dependent in Africa, with diaspora funds near 20–23% of GDP . Even mid-sized countries like Senegal rely heavily on this lifeline – at one point Senegal was ranked the most remittance-dependent country in Africa .
“Any new tax on these transfers is going to have a huge impact on African economies.”
– Enoch Aikins, economist, Institute for Security Studies
Economists Warn of Ripple Effects
African policymakers and economists are alarmed at the prospect of Washington skimming off a portion of these vital flows. “It would directly reduce household income for many Liberians,” warns William H. Dassin, an economist in Monrovia . “People who depend on remittances will have to make hard spending choices.” Across the continent, families use the money from relatives abroad to pay for daily needs and emergencies. Taking away 3.5% via a U.S. tax may sound small, but it’s effectively “taking money out of people’s pockets” – in many cases, the pockets of those who can least afford it.
Most senders are not wealthy either. “A lot of the time, these flows are coming from low-income folks in the United States to their families who are also not well off,” explains Monica de Bolle, a senior fellow at the Peterson Institute for International Economics . Migrant workers often take on extra jobs and scrimp to support relatives back home. Taxing their hard-earned transfers means “shutting off mechanisms by which they sustain themselves and their family members,” de Bolle says – essentially a double blow to migrant households . Notably, remittances are typically sent after income tax has already been paid on those wages in the U.S. Now senders face being taxed again for helping their families, a policy critics call “double taxation on the poor” .
African governments worry the ripple effects could hurt their broader economies. Local businesses benefit from remittance-fueled spending – from construction of family homes to funds for small enterprises. In Liberia, Dassin notes, many small traders and entrepreneurs rely on funds from overseas partners or customers. “If the U.S.-based sender feels it’s too expensive to continue, those businesses may lose capital or sales,” he told FrontPage Africa . In countries like Nigeria and Ghana, diaspora dollars help sustain consumer demand and investment in sectors ranging from real estate to education. A drop in remittances could thus dampen economic growth, especially in rural areas where these funds often flow directly into local commerce.
There is also a macro-economic concern: reduced remittance inflows mean less foreign currency entering African banking systems. Many central banks count diaspora receipts as a key source of foreign exchange reserves to stabilize the local currency. For example, the Nigerian Central Bank acknowledges that remittances from Nigerians living abroad significantly contribute to the country’s foreign reserves.
If those inflows shrink, countries with already fragile currencies – like the Nigerian naira or Egyptian pound – could face additional depreciation pressure. “Remittance inflows support the current account and the forex market,” the Central Bank of Nigeria emphasizes . A decline might force harder choices for monetary authorities. Inflation could tick up if currencies weaken (making imports costlier) or if governments must tighten import controls to conserve dollars. In Zimbabwe and Sierra Leone, where diaspora money helps families afford basic goods, losing part of that income could reduce purchasing power and raise hardship, potentially increasing poverty levels.
Notably, the U.S. tax would not funnel any revenue to the African countries in question – it would go to the U.S. Treasury. Meanwhile, African governments could ironically see their own tax receipts fall if household spending dips as a result. World Bank studies have shown remittances help reduce poverty and improve living standards ; thus, any shock to these flows can set back progress on poverty alleviation and social outcomes.
“For some of the poorest people on the planet, they’re going to be hit twice by the different steps the U.S. administration is taking.”
– Helen Dempster, Center for Global Development
Fears of Informal Flight
Economists also predict an unintended consequence: more money will go underground. When formal channels get expensive or encumbered by taxes, migrants often turn to informal avenues to send support home. “People who were using official channels are now going to try to use unofficial channels to evade the tax,” says de Bolle, noting that the phenomenon has been observed elsewhere . Research by the World Bank and others backs this up: taxing remittances leads to increased use of underground transfers .
Those informal mechanisms can range from traditional hawala or hand-carrying cash to newer methods like cryptocurrency. Aikins, the Pretoria-based analyst, predicts migrants will increasingly resort to “off-grid methods” – for example, converting money to crypto assets to send back home outside of government purview . In his own extended family, he notes, “Anytime there’s a family problem… I have to quickly find a way to send money” . If formal remittances are taxed, finding alternative pathways will be the next step.
From a law enforcement perspective, driving remittances off the books is troubling. Regulated money transfer operators play a key role in monitoring and reporting flows, which helps combat money laundering, terrorist financing and other illicit activity . “The United States already has a robust framework to monitor payments,” an Atlantic Council analysis noted, and money transmitters are central to it . If senders shift to unregulated channels, authorities lose visibility. Past cases illustrate the risk: When Argentina imposed heavy forex controls, it drove transactions into a shadow market (“black market ”) that was far harder to police . Similarly, African fintech startups and mobile money services could see users peel away to avoid the tax, opting for peer-to-peer cryptocurrency trades or simply hoarding cash until someone travels to hand-deliver it.
“If it becomes more expensive to send money, people might reduce what they send or find other ways,” says Isaac Yomah, who runs a money-transfer outlet outside Monrovia . “Our business could drop. People might even start avoiding the formal system altogether.” For remittance service providers – banks, Western Union, fintech apps – the U.S. bill imposes new compliance burdens (verifying senders’ citizenship status, collecting the tax) that could raise their costs . They too warn that customers will simply find it easier to exit the system. The Global Fintech Alliance has raised concerns that the tax would “push consumers to unregulated services, undermining transparency.”
Ironically, such outcomes would undercut the very security goals the tax is supposed to advance. The remit tax provision is widely seen as part of President Trump’s hard-line immigration agenda – aimed at discouraging migrants from coming to the U.S. and even encouraging those already there to “self-deport” . Yet by potentially destabilizing allied countries’ economies and weakening financial oversight, the policy could backfire. U.S. national security experts point out that stable incomes in developing countries reduce the pressures for illegal migration and conflict . Remittances “ultimately contribute to stabilizing fragile economies, reducing the financial distress that often drives illegal migration,” the World Bank has noted . If those funds dry up or go dark, it might spur the very instabilities – economic crises, surges in outward migration – that no border wall can fully contain.
Short-Term Shock, Long-Term Adjustments
If enacted, the 3.5% remittance tax would take effect in 2026 . African economies would likely feel the pinch immediately. In absolute terms, Nigerians stand to lose the most – roughly $215 million in the first year, according to one estimate . That figure represents the tax skim on the ~$6 billion sent annually from the U.S. to Nigeria. Other large receivers like Egypt and Ghana could similarly see tens of millions diverted from their communities to the U.S. Treasury. Meanwhile, smaller, aid-dependent states could suffer outsized effects relative to their size. For Liberia and Gambia, for instance, remittances make up around a quarter of national income . Even a few percentage points less arriving could mean leaner household budgets and lower consumer spending. “People live payment to payment,” says Yomah in Liberia – any reduction hits hard .
In the short run, senders might respond by sending slightly less money or less frequently, to compensate for the fee. Some diaspora might try to shoulder the extra cost so that their relatives receive the same net amount – essentially paying an extra $3.50 on every $100 sent – but not everyone can afford to do so. In many cases, experts say, senders will cut back. That means families back home will trim expenses, perhaps pulling children out of private school, delaying home repairs, or cutting protein out of diets. “Households will have to make hard choices,” Dassin reiterates, which could have knock-on social effects . Governments, too, might have to adjust their expectations for foreign exchange inflows – Nigeria’s central bank, for example, may need to revise its $1 billion/month remittance target if the volumes dip.
Over the longer term, the landscape of global remittances could shift. The U.S. tax would make America one of the most expensive G7 countries from which to send money, effectively raising the cost of remitting $200 by almost four percentage points (fees + tax nearing 10%, far above the UN Sustainable Development Goal of 3% cost) . This may gradually make other diaspora hubs – like Canada, Europe, or the Gulf – more attractive sources, relatively speaking, for money transfers. Some migrants in the U.S. could consider naturalizing as U.S. citizens to escape the tax (the bill exempts verified U.S. citizen senders , treating the tax as refundable for them). However, citizenship is a long process and not available to undocumented immigrants at all, so that option is limited.
If the tax proves onerous, over time diaspora communities might lobby for its repeal or find creative workarounds. Already, cryptocurrency-based remittance services are cropping up, and the tax might accelerate their adoption in Africa. Aikins expects a “tremendous effect on how people send money” – potentially a boom in tech-driven alternatives beyond government reach . While that might spur innovation, it could also introduce volatility and fraud risks.
The U.S. legislation is not final. It faces uncertain prospects in a divided Senate, and even some Republican senators and advisors have balked at the idea. Tesla CEO-turned-presidential advisor Elon Musk, though recently left that position, has reportedly voiced opposition, worried about straining relations with developing nations . If the broader budget bill fails, the remittance tax could die with it – but analysts caution that the idea could return in another form. “Even if this version doesn’t pass, similar policies could return,” Dassin warns. “The dependency on remittances leaves us vulnerable.”
That sobering observation is prompting reflection in Africa. Why are so many citizens dependent on money from abroad to begin with? The situation, speaks to governance and economic challenges that drive skilled workers to emigrate and constrain opportunity at home. “We cannot tell [the U.S.] how to go about their fiscal business,” Aikins says matter-of-factly, “but this is going to have a huge impact… We [Africans] have effectively dug our own grave by relying so much on these inflows.” His implication is clear: Africa must strengthen itself from within.
A Wake-Up Call for African Reforms
Across the continent, the looming U.S. remittance tax is being seen not only as a crisis to avert, but as a clarion call for self-reliance. I therefore reiterate my many calls and challenges to African leaders – especially in major economies like my country Nigeria, and South Africa – to seize this moment to enact long-delayed economic reforms. “The government and vendors in Liberia should start preparing now,” Dassin advises, “Even if the U.S. plan doesn’t go through, we must reduce our vulnerability.” That means diversifying economies and creating domestic jobs so that fewer families depend on a son or daughter working in New York, London or the UAE to put food on the table.
Fundamentally, I challenge all African governments and leaders to address the root causes that force their citizens to seek livelihoods abroad. High unemployment, corruption, political instability, and poor public services have led to an exodus of talent from countries like Nigeria, Ghana, Zimbabwe, and Ethiopia. Those emigrants prop up the economy with remittances, but it is a fragile substitute for sustainable development. Some of us have been advocating for policies that would spur investment at home – improving the business climate, fighting corruption so public funds actually reach communities, and trimming bloated bureaucracies that often siphon resources. For example, in Nigeria, curbing endemic graft and investing oil revenues into education, security, agriculture, housing and infrastructure could create opportunities that lessen the reliance on diaspora dollars. In South Africa, tackling high government spending and energy shortages could restore growth and instill hope in youth who might otherwise look overseas.
Many note that these steps align with global development agendas. Reducing poverty and inequality, promoting decent work, and building strong institutions are among the United Nations Sustainable Development Goals (SDGs). Yet progress on these goals has been uneven in Africa. The potential loss of remittance income underscores the urgency: countries cannot count indefinitely on the kindness (and untaxed generosity) of their diasporas. To meet targets for eradicating poverty and achieving shared prosperity – as laid out in the SDGs and the African Union’s Agenda 2063 – African nations must double down on reforms at home.
“Our diaspora is the biggest donor to our country. We owe it to them to fix the system here.”
– Policy advocate in Accra, quoted on local radio
In practical terms, that means harnessing remittances more productively while they last. Governments can create diaspora investment channels – such as diaspora bonds, infrastructure funds, or matched savings programs – to direct some of the billions sent home into long-term development projects. It also means ensuring macroeconomic stability: maintaining reasonable inflation and exchange rates so that remittance money retains its value locally (high inflation, as seen in parts of Africa, erodes the real benefit of each dollar sent). Some countries are already responding. Ghana, for instance, launched “Diaspora Homecoming” initiatives to attract diaspora capital into businesses. Nigeria’s central bank offered incentives like the “Naira 4 Dollar” scheme, rewarding recipients for using official remittance platforms. These efforts aim to maximize formal inflows and encourage diaspora contributions beyond individual remittances.
Ultimately, however, the onus lies on governments to create societies in which migration is a choice, not a necessity. The specter of the U.S. remittance tax has thrown into sharp relief how much African economies rely on an external lifeline – and how vulnerable that lifeline is to foreign politics. As the clock ticks toward the Senate’s decision, African leaders are watching anxiously. But whether or not the tax is implemented, the episode carries an unmistakable message. Africa must reduce its dependence on external remittances by building robust domestic economies.
If anything, the threatened loss of income should galvanize a “now or never” drive to tackle the stubborn problems holding back growth: entrenched poverty, corruption, wasteful government spending, and lack of opportunity. These are precisely the issues targeted by global development frameworks. From Abuja to Pretoria, policymakers should use this moment to reinvigorate efforts to meet the Sustainable Development Goals and the 17 interlinked goals that include no poverty, decent work, reduced inequalities, and strong institutions. Progress on those fronts will reduce the need for future generations to seek survival abroad.
In the coming weeks, African diplomats are expected to lobby Washington to reconsider the remittance tax, emphasizing its harmful impact on some of the world’s most vulnerable communities. The outcome on Capitol Hill remains uncertain. But whatever happens, one thing is clear: African governments must act decisively to strengthen their home economies. The diaspora has long been a safety net for Africa – now Africa must weave its own. The onus is on leaders to heed this wake-up call by enacting reforms that generate jobs, trust, and hope within their own borders. In doing so, they will not only blunt the threat posed by the U.S. remittance tax, but also move closer to achieving the vision of self-sustaining growth and prosperity enshrined in Agenda 2063 and the United Nations SDGs. The best tribute to the millions of Africans working hard in foreign lands is to build an Africa robust enough that its people can thrive at home- All these require altruistic and superior leadership, which unfortunately, seems to be lacking across much of the continent.
NB: Sonny Iroche is a Nigerian Alumnus of the University of Oxford and also a Senior Academic Fellow, African studies Centre. University of Oxford 2022-2023
• Holds a Post Graduate Degree in Artificial Intelligence, Saïd Business School. University of Oxford
• Member, UNESCO Technical Working Group on AI Readiness Assessment Methodology for Nigeria.
• Executive Chairman, GenAI Learning Concepts Ltd.
LinkedIn: http://linkedin.com/in/sonnyiroche
