Business community has said the federal government’s expatriate employment levy will hurt foreign Direct Investments drive into Nigeria.
The recent introduction of the Expatriate Employment Levy (EEL) by the federal government was to address wage gaps between expatriates and the Nigerian Labour force while encouraging skills transfer and the employment of qualified Nigerians in foreign-owned companies.
However, Organised Private Sector (OPS) recognized the need for a balanced approach to expatriate employment and its potential impact on Foreign Direct Investment (FDI) inflows.
According to the National Bureau of Statistics (NBS), Nigerian nationals constitute only 59 per cent of total jobs in Nigeria, their wages account for less than 45 per cent of total wages, and the average basic salary of expatriates stands at more than 45 per cent above the basic salary.
Speaking, the director-general of Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir said that the Association is struck with disbelief, seeing that the levy runs contrary to the President’s Renewed Hope Agenda and the kernel of his Fiscal Policy and Tax Reform initiative.
He added that the unintended negative consequences on the manufacturing sector are humongous and cannot be accommodated at this time of evident downturn in our economy.
“As the major investors and employers in Nigeria, manufacturers believe that, while the levy is ostensibly primed to promote local employment, improve forex and non-oil income earnings, the levy will regrettably deter foreign direct investments, disincentivize domestic investors who have partnership with foreign investors and undermine knowledge transfers that are critical for Nigeria’s economic growth,” Ajayi-Kadir emphasised.
He added that the policy will surely undermine the administration’s determination to position Nigeria as an attractive global investment destination.
“MAN posits that the rather punitive levy is already being perceived as a punishment imposed on investors for daring to invest in Nigeria and indigenous companies for employing needed foreign nationals. It will deter multinational companies from either investing in Nigeria or setting up regional headquarters in the country.
“Also, the levy will make Nigeria a more expensive location for global expertise that international companies require for their operations. Overall, we risk slowing down knowledge and skills transfer to Nigerians and undermining a key avenue for the country to move up the technology ladder,” he explained.
Also, the director-general of Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona said, “while we are fully in support of government policies that enhance the profile of the business environment, generate more revenue for the government, and create more opportunities for local employment, we are concerned about likely perception by foreign investors that the Nigerian government is not accommodative to foreign workers. This perception is harmful to our drive for Foreign Direct Investments (FDIs) inflows.”
She added that the Chamber acknowledges the government’s efforts to boost local employment and skills development through the EEL, saying “however, a careful balance must be struck so that this levy does not become an inhibition to attracting and retaining foreign investments crucial for economic growth.”
Also speaking, the director general, Nigeria Employers Consultative Association of Nigeria (NECA) Adewale-Smatt Oyerinde who made this known said, the move will cause more damage to the economy than contributing to the growth.
Citing the planned levy of US$10,000 & US$15, 000 levy on any employer with expatriate employees would discourage foreign investors as his reason for the alarm, the DG said: “The levy of between US$10,000 to US$15,000 on employers that employ expatriates when Nigeria is actively seeking FDI is not only exploitative and extortionist, it is also a contradiction that cannot be explained.”
According to Oyerinde, the move will not only further frustrate the federal government’s on-going Fiscal and Monetary reforms but it will also serve as a disincentive to Foreign Direct Investment (FDI) among many other unintended negative consequences.
Moreover, Oyerinde said, “while we absolutely support the federal government’s objective of developing the local workforce, we have, in fact, been at the forefront of promoting skills transfer, Technical Skills Development and employment generation. However, the recently launched initiative of the Ministry of Interior has the potential to create more fundamental economic and socio-labour distortions.
“The imposition of US$15,000 and US$10,000 on organisations that employ expatriates at a time when businesses are shutting down and leaving the country in droves is worrisome. Recent results of many businesses have shown massive losses, a situation that could potentially increase the level of unemployment with dire socio-economic consequences.”
While raising Organised Businesses’ concern on the legality and appropriateness of the Levy, the DG stated that, “we are concerned at the legality and appropriateness of the Expatriate Employment Levy (EEL) as well as its effect on the economy. The provisions of a Handbook can never override clear provisions of extant laws in Nigeria, especially the 1999 Constitution of the Federal Republic of Nigeria, Immigration Act and the Local Content Act among others.”
According to him, “the Ministry of Interior and indeed, the government cannot impose a tax or levy without appropriate legislation. For instance, Section 59 of the Nigerian Constitution requires that any imposition of tax, duty, fee or levy must be backed by an Act of the National Assembly. Levies that are imposed without complying with the provisions of section 59 of the Constitution offends the Constitution and are illegal.”