Bloomberg Audio Studios, Podcasts, radio News. The US President wants to tax money sent out of the US by non citizens. Instead of taxing our citizens to enrich foreign nations, we should be terrifing and taxing foreign nations to enrich our citizens. Does that make sense? But with many Africans sending remittance back to families in countries such as Nigeria, could this policy force money transfers underground?
Global remittance or global payments is really a need, not a want. The global worker is very resilient and so as they are as we're going through this process, what we find is that workers are moving around to make sure that they work in best places to send money back home.
On today's podcast, we're looking at the impact this tax could have on people relying on this income and the knock on impact it could have on Africans choosing to work or study in America. I'm Jennifer's Abasaja and this is the Next Africa Podcast, bringing you one story each week from the continent driving the future of global growth with the context only Bloomberg can provide. In a moment, we'll hear from our Nigeria Bureau Chief Anthony jos Brown.
But first let's speak with doctor Lydia Kamuntu Bossire. She's the founder of eight B Education Investments and she's based in New York. So Lydia, thanks so much for joining us. Your focus is on the higher education sector and you work with a number of people who come from Africa to study in the United States. How big of a deal are remittances in this sector? How much if you can quantify for us, how much are people actually sending back home?
Missionss are the current story in large part because we've seen h slashing of aid funding across the continent, initially from USAID as well as from other dollars, and so the discussion becomes where are the other sources of funding? And it turns out that remittances have been significantly larger than official development assistance for some time, depending on which data you look at, and these numbers do vary depending on if you know North Africa is being included in
that story. The remittances the most recent data, remittances are about ninety billion dollars a year going to the African continent, compared to something between thirty six billion to forty two billion dollars of official development assistance for my constituency in particular, already within my student population. We finance African students in global universities, and they already are sending money home from
their compass work and other engagements. Our recent impact survey shows that on average, they're sending about one hundred and ninety five dollars a month our students, and seventy seven percent of them already send remittances home. What happens is that remittances are an outflow from what they asperans. The students who have moved abroad send home, and when they become workers, they send home even more.
So.
This is the trend that we contribute to and that we see in Lydia.
Considering what you were mentioning there, what we've seen in twenty twenty five, and again some of the students and the constituency that you deal with on a day to day basis in your work, what is the concern about whether or not this new levee on remittances passes, especially for some of these students who aren't even making a lot of money yet aren't even worthy looking full time. What's the concern.
The big concern is that this affects how much can be sent home because remittances are really currently they finance consumption, right, it is the cousin who needs skool fees that these resources go to. And by taxing remittances, particularly from non citizens, which seems to be where the focus will go, it will make those flows lower than have been. My sense
is it will not discourage them. It will just take them underground and enable the flows to happen in ways that are harder to track and therefore perhaps harder to drive into a more structured vehicle for organized development. Because in fact, that is the big question, which is, given the scale of remittances, what are the avenues by which those resources can be channeled into programs that advance development separately from or in addition to supporting consumption across families.
And we know that a number of governments have actually been trying to do away with a lot of the so called black markets or underground networks as you allude to there Lydia. What's the link here to higher education and potentially some of the trends that we've been seeing as it pertains to African students and higher education in the US.
So there's a number of headwinds facing higher education in the US. As you know, the current administration has put a pause in neil visa appointments for students, and this is the season where o behalf of students who are holding offers to US universities go for their appointments. Is a lot of advocacy going on in the US to get that window of visa appointments to be open again.
The challenge with visa appointments not being available is that many students who hold offers in the US also hold offers elsewhere, and so you're likely to see this massive talent outflow that was initially distinct from to the US head elsewhere. What also is happening globally is an awareness of what's going on demographically, which is that Africa has the largest number of college age students, fastest growing number of college age students, and they're looking to take their
talents to places that welcome them. So we are likely to see a decline, at least in the short term of the numbers coming to the US, which will be a shame because we had really started seeing African numbers rising year after year. Having said that this is a trend that there's nothing to be done about right. The trend of African youth looking for opportunities globally is with us. It's not going anywhere global university is particularly in the OIC.
You're facing a demographic cliff. They need these young people, these young people looking for opportunities there. So the movement will continue. It may be facing head winds right now, but we do know that it will continue after the current season.
Lydia, thanks so much for joining us and for sharing those insights. It's great to have you. And let's turn to Nigeria now. Anthony os Brown is joining us. Anthony, so you oversee Nigeria, which is one of the largest recipients of remittance money. Can you put into context just how important these funds are for the economy and for Nigerians.
Relitiances are quite significant to the Nigerian economy. We get totally somewhere around twenty to twenty five billion annually from remediances, and a good chunk of this comes from the US. I'm not too sure the exact percentage, but it could be close to half of it coming from the US because of the large nature and the esperate community in the US, and a lot of this money going to supporting very poor families. As you know, Nigeria has almost
half of this population that are very poor. So those who are able to get out of the country send bondly back home to their families to support them. Healthcare is a big portion of remittance expenditures and then a good part of it goes into real estate investments, support schooling, education training, all forms of vocational training. A lot of families depend on their people are brought to support, especially the aged population, because there's no social security in Nigeria.
So yeah, so remitiancs is just plas a key role in the ecadomy and another key role in places even in supporting currency stability.
And and if you could explain that a bit more, how remittances and potentially a decline and remittances would affect the NYRA and the stability that we've seen over the past few months.
The Central Bank sees remittances as a key part of its foreigners change reserves accumulation policies. So last year I set the target of at least getting remittances through the official channels rising to about six hundred million currently to about a billion dollars a month. Because a lot of remediencies can also come introue on official sources. Has a history of unofficial power market, foreigners change market, and because of official policies, most of the money remittance money was
going through the power market. But now the Central Bank has set a direct policy of trying to attract remittances through the official market, and that basically is to use it to support currency stability. So if remittences drop through the official sources, you could see it possibly impacting on currency neyrastability locally, So.
Not something they'll they'll want to have to deal with after the past few years of relative instability and volatility. Anthony, stick with us when we come back. We're going to dig into more of the wider effects of some of these policies on US Africa relations. We'll be right back. Welcome back. Today we're looking at the proposed tax on
remittances and the impact it could have on countries across Africa. Anthony, we've talked a lot on this podcast about the increasingly fraught relations between the US and several countries across the continent. How do you see this policy likely to change things, especially considering some of those factors you pointed there remittance is very important for the livelihoods for a number of Africans.
Yeah, I think this just adds to be increasingly negative perception of the US. They just close down you said, they just closed down Voice of America, which was a key part of the media network, especially in northern Nigeria. So US is a big destination for US and Nigeria students who want to study abroad and even for people who want to leave the country and everything. But increasingly the latest policies from the art of the US has
made US less attractive for a lot of people. And this just adds to it is the own fairness of the whole process. The fact that the people who have worked and are taxed, are already taxed officially, will be taxed a second time. So that's that alone. Already they're spending about six percent on an average cost to send money locally. By the time you add this three point five percent tax, you're looking at ten percent of So anybody sending a thousand dollars is losing by one hundred dollars.
That will make the US a bit less attractive for people who want to send money back home and students generally. That makes it quite unattractive because most students while they're schooling also work and send money back home. So it just adds to the perception of US as less of an attractive destination for Nigerians and even the country has less influential in Nigerian affairs.
Have we heard anything from officials at this point, Anthony, And do you expect will hear anything.
I don't think officially you hear anything. I don't think the government will react in any way. The government will want something different, but then if that's happening, they may not officially take a stand. But I think what you will see is people they average Nigeria looking for alternatives on wa are to go to school on Europe is likely to be a bigger destination going forward, and they possibly even Asia. Increasingly Nigerians are looking at Asia and
alternatives for schooling. Most Nigerians prefer those who can afford it at the higher level, mostly the middle income Nagerians prefer their children's schooling outside the country, at least when comes university and master's levels. So with these policies from the US will likely see most of more Nigerians students going towards Asia and possibly Europe.
Anthony. Thank you so much for joining us and for your reporting, and thanks also to doctor Lydia kmunto Bossire for speaking with us earlier. You can read all of our coverage of President Trump's tax bill across Bloomberg platforms. Now here's some of the other stories from the region we've been following. This week, South Africa's National Assembly approved the Treasury's fiscal framework, bringing the adoption of the annual budget a step closer after months of wrangling over tax
increases and logistics. Giant DHL Group plans to vest about five hundred and seventy five million dollars in healthcare services in Africa and the Middle East over the next five years to capitalize on China's push into the regents. You can find these stories on Bloomberg platforms, including in the Next Africa Newsletter. We'll put a link to that in the show notes. This program was produced by Adrian Bradley and Tiba Adebio. Don't forget to follow and review the
show wherever you usually get your podcasts. I'm Jennifer's Abasanta. Thanks as always for listening. We'll see you next time.