An Appraisal on the Implication of the Expatriate Employment Levy in Nigeria

CONTRIBUTED BY CHIBUEZE .K. JAMES

INTRODUCTION

The Expatriate Employment Levy (EEL) was introduced on the 27^th day of February 2024, by the president of the Federal Republic of Nigeria, His Excellency Bola Ahmed Tinubu. This levy was introduced during the launching of the EEL handbook.^[1]

The EEL handbook is the guide for navigating the inessentials of the levy, making a clear insight into its purpose; mechanics implication and requirements. The levy is particularly for Employers who employ expatriate workers in Nigeria.^[2] In other words, this new levy is imposed on employers of foreign experts who provide their services in Nigeria. Such services include businesses involved in agriculture; construction activities; mining; banking and finance; shipping; information communication and technology as well as all other sectors that employ the services of expatriates.

This new levy opened the floodgates for various questions of whether EEL is truly a boon or bane to businesses in Nigeria, leaving business owners begging for an answer. Hence, the article focuses on the highlights of the EEL, the implications of EEL on businesses in Nigeria hiring foreign workers, potential effects on the economy, and compliance challenges.

A BRIEF OVERVIEW OF THE EEL

The EEL has its major objectives which are in the handbook.^[3] They include:

1. Promotion of skill transfer and knowledge sharing from expatriates to locals;
2. To balance economic growth and social welfare;
3. To enhance collaboration between the public and private sector; and
4. Encouraging local talent acquisition.

More so, businesses employing expatriate workers for a duration not less than 183 days (Residency Rule) are subject to this policy.^[4]

The levy rates are set at US$15,000 for expatriates in directorship roles and US$10,000 for other workers.^[5] However, certain categories of individuals, such as government staff, diplomats, and dependents of expatriates, as well as those exempted under the EEL Handbook, are not subject to this policy.^[6]

Expatriate employers are entrusted with specific responsibilities outlined in the handbook, including maintaining comprehensive data, adhering to reporting timelines and ensuring timely payment of levies.^[7] Expatriate employees also have responsibilities as stipulated in paragraph 5.3 of the EEL Handbook.

The handbook^[8] specifies penalties for non-compliance with the EEL. Which include:

1. A ₦3 million fine for corporate entities that fail to file the EEL within thirty (30) days.
2. A ₦3 million fine for failure to register new employees within thirty (30) days.
3. A ₦3 million fine for submitting forged information related to the EEL.
4. A ₦3 million fine for corporate entities that fail to renew the EEL within thirty (30) days.

THE IMPLICATIONS OF EEL ON BUSINESSES IN NIGERIA HIRING FOREIGN WORKERS

The introduction of the EEL by the federal government has potential benefits and challenges to businesses in Nigeria which engage the services of expatriates. The EEL presents a complex situation for businesses since there is a balancing act between encouraging local talent and maintaining access to specialized expertise. The effectiveness of the EEL will depend on how the government addresses these potential drawbacks and how businesses adapt their hiring strategies. The following are the impact the levy has on businesses in Nigeria that engage expatriates.

• 1. Increase in cost of Employment: One of the key highlights of the EEL is that the levy is to be paid at a rate of US$ 15,000 for directors and US$ 10,000 for other workers^[9]. This would increase the cost of employing foreign workers in Nigeria, and would adversely affect the business’ financial stamina. Businesses having to pay so much levy at that rate as well as other taxes they are liable to pay would increase the cost of employment; and may, in the long run, lead to multiple taxation thereby discouraging the employment of expatriates.
  2. Increase in Prices of Products and Services: the introduction of the EEL will bring about a rise in the prices of products and services provided by the business. This is to set off the levy paid and still be able to maintain their profit.
  3. Increase in the cost consideration for new businesses: Those business operations which require specialized skills that cannot be sourced locally will have an increase in the cost of venturing into new business.^[10] This may limit the business’s ability to engage highly skilled expatriate workers to meet project requirements, which may lead to the delivery of sub-optimal projects.

THE POTENTIAL EFFECTS OF EEL ON THE NIGERIAN ECONOMY

1. Discouragement of Foreign Investment: High EEL costs could deter Multinational Corporations (MNCs) from investing in Nigeria, especially for projects requiring specialized skills not readily available locally. This could hinder economic growth, innovation, and technology transfer. The Lagos Chamber of Commerce and Industry (LCCI) says the EEL launched by the federal government is harmful to the country’s drive for foreign direct investments (FDIs).^[11] This shows a big disadvantage to the Nigerian economy.
2. Stunted Innovative Development: Multi-national Companies often bring valuable expertise and technology to the countries they invest in.^[12] The imposition of the EEL may reduce foreign investment which could hinder innovation and technology transfer in Nigeria, impacting the development of new industries and products.
3. Dollar Domination: The EEL which is to be paid in Nigeria will be paid in the US dollar currency. This will have an adverse effect on the Nigerian naira making it very weak. This also goes against the integrity of the legal tender in Nigeria and contributes to an increase in the demand for dollars in Nigeria.

COMPLIANCE CHALLENGES OF EEL ON BUSINESSES IN NIGERIA.

The recently introduced Expatriate Employment Levy (EEL) in Nigeria has brought up some potential compliance challenges. These include:

• 1. Short compliance window: Employers have a limited timeframe to register existing expatriate employees and comply with the filing deadlines. A one-month window was given by the federal government, from 15^th March 2024 to 15^th April 2024, for employers to submit the records of their employed expatriates.^[13] This tight schedule may make it difficult for companies to adjust their processes and finances.
  2. No Certain Effective Date: The EEL handbook does not stipulate a clear effective commencement date when the policy would be set in motion. Unlike other policies, directives and circulars that often have a commencement date, the EEL handbook is silent as to the commencement period of the policy. This puts investors and business owners in confusion, as the commencement date of the policy is unknown.
  3. Unclear legal framework: There is an unclear legal framework for the EEL in Nigeria. The question that leaves one in the maze is ‘whether the EEL handbook could act as a legal framework or guideline for expatriate employment?’ Without a certain framework, the EEL may not have a strong hold on the business owners who employ expatriate workers in Nigeria.

A HOLD ON THE EEL APPLICATION IN NIGERIA

Despite the key highlights espoused by the EEL handbook, the Nigerian government has put on hold the implementation of the newly introduced EEL intended to address wage gaps between expatriates and Nigerian workers while encouraging skills transfer and the employment of qualified Nigerians in foreign-owned companies.^[14]

Implementing this policy has pros and cons for the Nigerian economy. The bright side of the EEL is that it would encourage the use of local talents to get the needed job done. It would indeed curb the brain drain in Nigeria, widen the tax net as well as reduce the rate of unemployment in the country.

However, the policy has its cons as discussed earlier, the payment in a foreign currency would affect the Nigerian naira currency and raise the demand for the dollar in Nigeria. Also, the policy has the capability to weaken the FDIs in Nigeria. The prospective big business owners would be discouraged from starting a business which involves the services of foreign expatriates. There is a very high possibility for an increase in the cost of goods at this time.

In addition, certain provisions outlined in the EEL,^[15] appear to already be provided for by the immigration act^[16]. For instance, The Immigration Act specifies the priority of consideration for Nigerians and establishes suitable quotas in the involvement of expatriates,^[17] while the Local Content Act assures jobs for Nigerians.^[18] As a result, the EEL would be redundant and an unnecessary addition.

Hence, it is a bold step taken by the government to retrace its steps and suspend the implementation of this policy so as not to cause more harm. The relevant stakeholders of the economy could come together to find another way around the EEL.

CONCLUSION

The Expatriate Employment Levy (EEL), was introduced to maintain a clear balance between promoting economic growth and protecting the local workforce in Nigeria. This policy has faced criticism for potentially increasing business costs, discouraging foreign direct investment due to the payment of the levy in US dollars, and lacking a clear legal framework for EEL. Recognizing these concerns, the Nigerian government took a significant step to suspend the EEL implementation.

The future of the EEL remains uncertain. The government might choose to modify the policy based on the feedback received during the consultation period. On the other hand, they could decide to scrap the EEL altogether and explore different options for achieving their economic and workforce development goals.

1. Chiamaka Okafor, ‘Nigeria Imposes Levy on Expatriate Workers’ Premium Times ( 27^th February, 2027) https://www.premiumtimesng.com/news/top-news/672456-nigeria-imposes-levy-on-expatriate-workers.html accessed 16 March 2024 ↑
2. Expatriate Employment Levy Handbook 2023 (para 1.3) ↑
3. Expatriate Employment Levy Handbook 2024, Cap 3.0 ↑
4. Ibid at para 3.4.1 ↑
5. Ibid at para 8.3.1 ↑
6. Ibid at para 8.4 ↑
7. Ibid at para 5.2 ↑
8. Ibid at para 6.3 ↑
9. Ibid at para 8.3.1 ↑
10. Samuel Omofojoye, ‘The Implication of the New Expatriate Employment Levy’ < https://sowprofessional.com/implications-of-the-new-expatriate-employment-levy/> accessed 16 March 2024. ↑
11. Aderonke Oni, ‘Expatriate Levey Harmful to Foreign Investment Drive, LCCI tells FG’ The Cable ( 5th March 2024) https://www.thecable.ng/expatriate-levy-harmful-to-foreign-investment-drive-lcci-tells-fg accessed 16 March 2024 ↑
12. J.Eluka, Ndubuisi-Okolo Purity Uzoamaka and Anekwe Rita Ifeoma, ‘Multinational Corporations and their effect on Nigerian Economy’ [2016] 8 EJBM https://core.ac.uk/download/pdf/234627168.pdf accessed 16 March 2024 ↑
13. Bicci Alli, ‘Expatriate Employment Levy: Matters Arising’ This Day ( 7^th March 2024) < https://www.thisdaylive.com/index.php/2024/03/09/expatriate-employment-levy-matters-arising accessed 16 March 2024 ↑
14. Ibid. ↑
15. Expatriate Employment Levy Handbook 2024, Para 3.4.2. ↑
16. Immigration Act. Cap 17, Section 8. ↑
17. Ibid. ↑
18. Section 41(2)of the Local Content Act ↑