Serome Akoroda
Aremittance tax of one percent for certain funds going out of the USA was signed into law on July 4, 2025, via the One Big Beautiful Bill Act (OBBBA), with a planned implementation date of January 1, 2026. (Mayer Brown, 2025) (Wise, 2025).
Under the bill’s text, each cross-border remittance will be charged a tax of 1%, subject to certain terms and conditions.
Liability rests with the sender, but the remittance transfer provider must collect the tax at the time of transaction and remit it periodically to the U.S. Treasury. If the provider fails to do so, it may also be held liable. Crucially, the statute targets cash-like funding methods: cash deposits, money orders, and cashier’s checks fall within scope — whereas transfers funded via U.S. bank accounts, credit cards, or debit cards are expressly excluded.
For senders, the implications are clear: Your funding source determines tax exposure; Cash-based methods will likely incur the 1% excise; And remittance companies will implement new pricing and compliance protocols accordingly.
Although one percent seems negligible, this amount begins to add up as the volume increase and research suggests that even small increases in transfer costs can shift remittances toward informal and less regulated channels such as travel cash and peer-to-peer (p2p) transfers. A study estimates that a one percent tax could reduce formal, cash‑based remittances by about US$2.7 billion in 2025 (≈2.66%) globally (AidData, 2023).
While this is an imminent development that will affect how, when, and what funds are sent by immigrant nationalities resident in the US, the implications for developing countries like Nigeria are far‑reaching. This shift in the global remittance landscape presents both a reality check and multiple opportunities to re-evaluate the question: How can we maximize the power of diaspora capital — to catalyze sustainable growth, expansion, and development?
In 2023, remittances to low‑ and middle‑income countries (LMICs) reached about US$669 billion, growing roughly 3.8% over the prior year despite global inflationary pressures. (World Bank, 2023a). Nigeria alone reportedly received more than US$20 billion from its diaspora in that year (Reuters, 2024), not even counting informal channels or travel cash. This amount in some years was almost comparable to Nigeria’s main export revenue streams, Crude oil. Yet we have only begun to scratch the surface of what this volume of funds can achieve for nation-building. These numbers tell a powerful story — not just of generosity, but of untapped potential. By channeling even, a fraction of these inflows into structured investments, Nigeria can transform remittances from short-term support into long-term national assets. With this scale of remittance inflows, Nigeria now has a unique window to reimagine how diaspora contributions are deployed; the initiatives below outline concrete pathways for turning these funds into lasting development impact.
Converting Transfers to Long-Term Assets
Nigeria has already demonstrated proof of concept. In 2017, the federal government raised US$300 million through its first Diaspora Bond, at a coupon rate of ~5.625% over five years. The issuance was oversubscribed (~130% subscription), showing strong demand from Nigerian Diaspora for structured investment instruments tied to national development (Debt Management Office Nigeria, 2017).
We can continue to build on this precedent by creating new bond tranches targeted at critical sectors — education, healthcare, infrastructure — converting part of existing consumptive or new remittances into productive capital that yields returns, improves quality of life, and generates employment.
Harnessing Social Capital & “Patriotic Discount”
Diaspora investors often accept slightly lower financial returns in exchange for higher social or patriotic impacts. This “patriotic discount” can be leveraged if there is trust, clear governance, and proper oversight. Some examples of leveraging this include: ·Peer‑to‑peer/crowdfunding models: Nigerians abroad could pool capital to fund viable business or community projects back home, with transparent reporting, risk assessments, and clear ROI metrics.
Diaspora investment funds: The Nigerian government mentioned in 2024 that it was exploring a US$10 billion diaspora fund, intended to channel remittance flows and diaspora savings into multi‑sector investments (infrastructure, health, education) (Reuters, 2024). This shows willingness and the opportunity to transform remittances into instruments with multiplier effects.
A Portfolio Approach to Nation‑Building
We must transform our perspectives of remittances from one‑dimensional (i.e., purely for family or consumption) to a multi-allocation model. This model could look like Traditional support (family & friends) – 50%, Community/ philanthropic investments (scholarships, clinics, skills training – 25%, Financial instruments with returns (bonds, mortgages, T‑bills, etc.
Even seemingly modest amounts matter: If US$100 is remitted by 100 people, that’s US$10,000 (≈15,000,000 depending on FX). That could fund 5‑10 significant small/medium-sized, dependent on business model and capital financing needs. Risk is spread, and the cost of mobilization is relatively low if well‑structured.
How Government Policies Can Enable This
For Nigeria to scale this, the government could play enabling roles:
• De‑risk & simplify cash flows: Predictable FX windows for returns or coupon payments. Political risk, currency risk, and investment exit risk are real concerns. If returns are uncertain or trust is low, diaspora investors may prefer safer foreign assets rather than homeland projects.
• Strengthen governance & transparency: Clear project plans, regular reporting, independent audits are necessary to attract diaspora investors.
•Diaspora‑friendly identity registration: Allow Nigerians abroad to obtain BVN/NIN easily, simplify KYC/AML procedures for diaspora investors.
• One‑click access to securities: E‑platforms for purchasing government or private bonds, mortgages, T‑bills etc., from abroad.
• Government & private marketplace: A centralized marketplace listing both government‑issued and private investment offerings, with proper verification, pricing, and exit options.
What Can Be Done Now: Quick Wins for Diaspora-Led Impact
In the short term, Diaspora Nigerians can take the following actions to begin to maximise remittances back home:
Optimize Transfer Channels
Use U.S.-linked bank accounts, credit cards, or debit cards for remittance funding instead of cash. This minimises or eliminates the 1% excise tax and ensures your full contribution reaches its intended recipient or cause.
Support Pooled Impact Funds
Team up with other Nigerians in your city or state to pool contributions monthly for targeted impact — from funding scholarships to equipping hospitals. A coordinated ₦15 million can do far more than 100 individual ₦150,000 remittances.
Fund & Mentor Local Entrepreneurs
Identify credible micro or small businesses in Nigeria and support them with micro-loans, grants or equity injections. Go a step further — offer regular virtual mentoring to ensure sustainable growth and skills transfer.
Sponsor Local Community Infrastructure Projects
Pick a school, hospital, or marginalized group and sponsor a one-time or regular infrastructure upgrade (e.g., classroom furniture, boreholes, internet access, computers). Publicly track results and inspire peers to replicate in their regions.
Collaborate with Tech Hubs for Digital Education
Fund scholarships or bootcamps for underserved Nigerian youth to learn coding, data, AI, design or other relevant tech skills that can be monetized remotely and in-person. Partner with trusted hubs and offer diaspora mentorship.
The Remittance Tax as a Potential Catalyst
While the upcoming 1% excise tax may influence how certain remittances are structured and reduce the volume of remittances slightly, it also creates an inflection point — a moment to rethink and realign. For countries like Nigeria, this should serve as a wake‑up call to shift from purely consumptive remittances toward more strategic diaspora partnership in national development. With the right platforms, policies, and transparency, diaspora contributions can move beyond consumption to fuel infrastructure, innovation, and inclusive growth. What may appear as a policy adjustment today could, in fact, be the prompt that unlocks deeper, longer-lasting engagement between the diaspora and the homeland.
Conclusion
Remittances are already a lifeline—not just for individual households but for Nigeria’s economy. But their full potential remains untapped. With intelligent policy, transparent governance, and investment vehicles that provide both financial and social yield, Nigeria can evolve its diaspora contributions from purely transactional transfers into strategic partnerships for building the nation.
Akoroda, Senior Account Manager at Amazon Web Services, U.S.A, is a finance and technology leader with 10+ years across banking, fintech, and digital innovation
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