Can Nigeria tax its remote workers?

Feb 23, 2022|Gbemisola Alonge

Nigerians might never stop chasing dollars.

If the naira is not struggling with its value falling in the foreign exchange market (between 2020 and 2021 alone, it fell from ₦463/$1 to ₦570/$1), then double-digit inflation will erode its purchasing power. Add to that the rigid rental structure that leaves Nigerians paying their landlords annual rent (the norm is monthly payment in other countries). There is also the fact that the country's national grid cannot meet the population's energy demand, so people have to rely on expensive generators for power.

I think it goes without saying that living in Nigeria and earning in naira is costly.

Some takeaways:

A growing number of Nigerians are taking up roles in foreign companies that offer significantly higher pay than their Nigerian counterparts. The dwindling value of the naira makes it more attractive to earn in foreign currency.
This creates a significant opportunity for the government to earn more personal income tax. However, taxation is very complex, especially when it involves international parties. Many multinationals, therefore, exploit the current system to avoid paying taxes.
Many governments have responded to this through calls for global tax reform. Locally, the Nigerian government would have to plug in the loopholes created by international hiring or risk significant tax avoidance from Nigerians.

Luckily, the current uptick in remote work that has made finding a job borderless might offer some respite. According to data from LinkedIn, the volume of job searches using the 'Remote' filter on the job search platform increased by about 60% since the pandemic started in March 2020. Also, the share of remote job applications has increased nearly 2.5 times globally within the same period. In addition, the high cost of tech talent in countries like the US (the median programmer in the US earns more than $110,000 a year, more than double the average pay of non-tech workers) means that global companies have been driven to use offshore developers.

In short, you do not have to migrate to another country to earn more. As long as you have the skills that match what a foreign company is looking for, you can comfortably earn in FX while living in Nigeria.

It is indeed the Nigerian dream.