Anew 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.

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 accounting for an estimated 5–6% of Africa’s GDP. The United States is the single largest source, contributing at least $12 billion of those flows. 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. Unlike aid or loans, which are often diminished by administrative costs, diaspora money transfers go directly to households, making an immediate impact. They cover essentials—food, housing, school fees, medical bills—and often arrive quickly in times of emergency.

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, at times even rivaling oil revenues. 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 a significant 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 that these transfers now earn more foreign exchange than the country’s major exports like tea and horticulture.

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 comprising 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.

Economists and policymakers across the continent 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.” Taking away 3.5% via a U.S. tax may sound small, but it’s effectively “taking money out of people’s pockets”—especially those least able to 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,” she 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 small enterprise capital. 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 dampen economic growth, especially in rural areas where these funds often flow directly into local commerce.

There is also a macroeconomic 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 local currencies. For example, the Central Bank of Nigeria acknowledges that remittances from Nigerians living abroad significantly contribute to the country’s foreign reserves. If those inflows shrink, fragile currencies—like the Nigerian naira or Egyptian pound—could face additional depreciation pressure. 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 increase poverty and reduce purchasing power.

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. 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.

Economists also warn of unintended consequences: more money may go underground. When formal channels get expensive or encumbered by taxes, migrants often turn to informal avenues. “People who were using official channels are now going to try to use unofficial channels to evade the tax,” says de Bolle. 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 to newer methods like cryptocurrency. Aikins, the Pretoria-based analyst, predicts migrants will increasingly resort to “off-grid methods.” 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, alternative pathways will become essential.

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 and terrorist financing. If senders shift to unregulated channels, authorities lose visibility. When Argentina imposed heavy forex controls, it drove transactions into a shadow 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 hand-delivering cash.

“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, such as verifying senders’ citizenship status and collecting the tax, which could raise their costs. 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. Yet by destabilizing allied economies and weakening financial oversight, the policy could backfire. Stable incomes in developing countries reduce pressures for illegal migration and conflict. If those funds dry up or go dark, it might spur the very instabilities that no border wall can contain.

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. Other large receivers like Egypt and Ghana could similarly see tens of millions diverted to the U.S. Treasury. Meanwhile, smaller aid-dependent states could suffer outsized effects relative to their size. 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 send slightly less money or send it less frequently. Some may shoulder the extra cost to ensure their relatives receive the same net amount—but not all can afford to do so. Households may pull children out of private schools, delay home repairs, or reduce food quality. Governments, too, might need to adjust their foreign exchange targets.

Over the longer term, this tax could make the U.S. one of the most expensive G7 countries from which to remit funds. This may gradually make Canada, Europe, or the Gulf more attractive sources for diaspora transfers. Some migrants might even pursue U.S. citizenship to avoid the tax, though this path is neither quick nor available to the undocumented.

If the tax proves too burdensome, diaspora communities might lobby for its repeal or seek creative workarounds. Cryptocurrency-based remittance services could see a boom. While innovative, these could introduce volatility and fraud risks.

The U.S. legislation is not final. It faces uncertain prospects in a divided Senate. If the broader budget bill fails, the remittance tax could die with it—but analysts caution it may return in another form.

This episode is a clarion call for self-reliance. I therefore reiterate my many calls to African leaders—especially in major economies like Nigeria and South Africa—to seize this moment to enact long-delayed economic reforms. That means creating jobs and opportunities at home, reducing dependency on diaspora dollars.

High unemployment, corruption, and poor governance have led to an exodus of talent from countries like Nigeria, Ghana, Zimbabwe, and Ethiopia. Some of us have been advocating for reforms that would spur investment at home—improving the business climate, fighting corruption, and channeling resources into infrastructure, education, and agriculture. These efforts align with the United Nations Sustainable Development Goals and the African Union’s Agenda 2063.

Governments can also harness remittances more productively—through diaspora bonds, infrastructure funds, or matched savings programs. Efforts like Ghana’s “Diaspora Homecoming” and Nigeria’s “Naira 4 Dollar” scheme are steps in the right direction.

Ultimately, the onus lies on African leaders to build societies in which migration is a choice—not a necessity. Whether or not the U.S. Senate approves the tax, the message is clear: Africa must build robust domestic economies and reduce its vulnerability to external shocks. The diaspora has long been a safety net for Africa—now Africa must weave its own.