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Expatriate employment levy raise concerns

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By Usman Oladimeji

Implementing this levy will have severe negative impacts on FDI.

The recent introduction of Expatriate Employment Levy (EEL) by the federal government has been met with dissent from the business communities, saying that it would have a negative impact on the influx of foreign direct investments into Nigeria. Originally intended to bridge the wage disparity between expatriates and local Nigerian workers, the EEL also aimed to promote knowledge transfer and increase the employment of skilled Nigerians within multinational corporations. The Organised Private Sector (OPS) acknowledged the importance of taking a fair and measured approach to expatriate hiring and its influence on Foreign Direct Investment (FDI) in Nigeria.

Figures from the National Bureau of Statistics (NBS) shows that Nigerian citizens hold just 59 percent of all jobs in the country. Less than half of total wages in Nigeria are earned by Nigerians, with the remaining amount being earned by expatriates whose average basic salary is significantly higher than that of locals. According to Segun Ajayi-Kadir, director-general of the Manufacturers Association of Nigeria (MAN), the Association is shocked by the levy as it runs contrary to the President’s Renewed Hope Agenda and tax reform plans. He noted that the levy will have severe negative impacts on the manufacturing sector during these tough economic times.

Foreign direct investments could be hindered.

Manufacturers in Nigeria, being key players in investment and employment, are concerned that the levy, although intended to boost local employment, increase foreign exchange and non-oil revenue, will unfortunately hinder foreign direct investments, discourage domestic investors with foreign partnerships, and impede crucial knowledge transfers needed for the country’s economic advancement, highlighted by Ajayi-Kadir. His statement emphasized how the policy could potentially harm the government’s efforts to make Nigeria an appealing choice for international investors. MAN argues that the harsh tax is seen as a penalty on both foreign investors and local companies hiring foreign workers in Nigeria.

Dr. Chinyere Almona, the director-general of Lagos Chamber of Commerce and Industry (LCCI), said that while government policies that elevate the business environment’s reputation is wholly supported, there are concerns about potential foreign investors perceiving the Nigerian government as unwelcoming to foreign employees. She mentioned that the Chamber recognizes the government’s work in enhancing local employment and skills training with the EEL. However, she emphasized the need to find a delicate equilibrium to prevent this levy from hindering the attraction and retention of foreign investments, which are essential for economic expansion.

Imposing such a levy in Nigeria is unjust and unethical.

On his part, Adewale-Smatt Oyerinde, the director general of the Nigeria Employers Consultative Association (NECA), stated that the decision would harm the economy more than it would foster development. According to him, imposing a levy of $10,000 to $15,000 on companies hiring expatriates in a country like Nigeria, which is striving to attract foreign direct investment, is unjust and unethical. He claimed that this action goes against the current efforts to reform fiscal and monetary policies and will only create more obstacles.

This initiative, introduced through the Ministry of Interior was described as having the ability to cause significant economic and socio-labor imbalances. It could discourage foreign direct Investment among many other unintended negative consequences. Recent financial reports from various companies indicate substantial losses, which could lead to a rise in unemployment and negative social and economic outcomes. The Director General expressed worries about the Expatriate Employment Levy, questioning its legality and impact on the economy, as Organised Businesses also expressed their concerns about the levy’s appropriateness.

Related Article: Violation of expatriate quotas to be stopped

According to Oyerinde, the Handbook’s provisions must always align with existing laws in Nigeria, such as the 1999 Constitution, Immigration Act, and Local Content Act. He stated that the Ministry of Interior and the government cannot introduce taxes or fees without proper legal backing. One example is the requirement in Section 59 of the Nigerian Constitution that any tax, duty, fee, or levy must be authorized by an Act of the National Assembly. According to him, levies imposed without adhering to the guidelines of Section 59 violate the Constitution and are considered unlawful.

Related Link

Ministry of Interior: Website

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