WEBVTT - A US Tax With Big Consequences For Africa 0:00:02.520 --> 0:00:11.280 Bloomberg Audio Studios, Podcasts, radio News. The US President wants 0:00:11.320 --> 0:00:14.960 to tax money sent out of the US by non citizens. 0:00:15.480 --> 0:00:18.640 Instead of taxing our citizens to enrich foreign nations, we 0:00:18.680 --> 0:00:23.439 should be terrifing and taxing foreign nations to enrich our citizens. 0:00:23.440 --> 0:00:27.560 Does that make sense? But with many Africans sending remittance 0:00:27.760 --> 0:00:30.960 back to families in countries such as Nigeria, could this 0:00:31.080 --> 0:00:33.760 policy force money transfers underground? 0:00:33.960 --> 0:00:37.040 Global remittance or global payments is really a need, not 0:00:37.120 --> 0:00:40.159 a want. The global worker is very resilient and so 0:00:40.520 --> 0:00:43.360 as they are as we're going through this process, what 0:00:43.400 --> 0:00:45.599 we find is that workers are moving around to make 0:00:45.600 --> 0:00:48.000 sure that they work in best places to send money 0:00:48.000 --> 0:00:48.440 back home. 0:00:48.760 --> 0:00:52.160 On today's podcast, we're looking at the impact this tax 0:00:52.200 --> 0:00:55.040 could have on people relying on this income and the 0:00:55.160 --> 0:00:58.240 knock on impact it could have on Africans choosing to 0:00:58.320 --> 0:01:05.240 work or study in America. I'm Jennifer's Abasaja and this 0:01:05.440 --> 0:01:08.759 is the Next Africa Podcast, bringing you one story each 0:01:08.840 --> 0:01:12.080 week from the continent driving the future of global growth 0:01:12.120 --> 0:01:18.040 with the context only Bloomberg can provide. In a moment, 0:01:18.080 --> 0:01:20.960 we'll hear from our Nigeria Bureau Chief Anthony jos Brown. 0:01:21.040 --> 0:01:25.039 But first let's speak with doctor Lydia Kamuntu Bossire. She's 0:01:25.040 --> 0:01:28.640 the founder of eight B Education Investments and she's based 0:01:28.680 --> 0:01:32.280 in New York. So Lydia, thanks so much for joining us. 0:01:32.640 --> 0:01:35.880 Your focus is on the higher education sector and you 0:01:35.959 --> 0:01:38.920 work with a number of people who come from Africa 0:01:38.959 --> 0:01:42.120 to study in the United States. How big of a 0:01:42.160 --> 0:01:46.240 deal are remittances in this sector? How much if you 0:01:46.360 --> 0:01:49.800 can quantify for us, how much are people actually sending 0:01:49.840 --> 0:01:50.320 back home? 0:01:51.960 --> 0:01:57.840 Missionss are the current story in large part because we've 0:01:57.920 --> 0:02:03.840 seen h slashing of aid funding across the continent, initially 0:02:03.840 --> 0:02:07.440 from USAID as well as from other dollars, and so 0:02:07.720 --> 0:02:11.600 the discussion becomes where are the other sources of funding? 0:02:11.720 --> 0:02:17.919 And it turns out that remittances have been significantly larger 0:02:17.919 --> 0:02:23.760 than official development assistance for some time, depending on which 0:02:23.840 --> 0:02:26.919 data you look at, and these numbers do vary depending 0:02:26.960 --> 0:02:29.679 on if you know North Africa is being included in 0:02:30.680 --> 0:02:37.600 that story. The remittances the most recent data, remittances are 0:02:37.680 --> 0:02:41.959 about ninety billion dollars a year going to the African continent, 0:02:42.480 --> 0:02:45.560 compared to something between thirty six billion to forty two 0:02:46.000 --> 0:02:52.600 billion dollars of official development assistance for my constituency in particular, 0:02:53.080 --> 0:02:57.600 already within my student population. We finance African students in 0:02:57.639 --> 0:03:02.679 global universities, and they already are sending money home from 0:03:03.200 --> 0:03:09.680 their compass work and other engagements. Our recent impact survey 0:03:09.800 --> 0:03:13.200 shows that on average, they're sending about one hundred and 0:03:13.280 --> 0:03:16.480 ninety five dollars a month our students, and seventy seven 0:03:16.520 --> 0:03:20.640 percent of them already send remittances home. What happens is 0:03:20.680 --> 0:03:26.200 that remittances are an outflow from what they asperans. The 0:03:26.240 --> 0:03:29.800 students who have moved abroad send home, and when they 0:03:29.880 --> 0:03:32.160 become workers, they send home even more. 0:03:32.240 --> 0:03:32.400 So. 0:03:32.480 --> 0:03:36.000 This is the trend that we contribute to and that 0:03:36.040 --> 0:03:37.360 we see in Lydia. 0:03:37.480 --> 0:03:40.680 Considering what you were mentioning there, what we've seen in 0:03:40.720 --> 0:03:44.080 twenty twenty five, and again some of the students and 0:03:44.120 --> 0:03:47.520 the constituency that you deal with on a day to 0:03:47.560 --> 0:03:50.880 day basis in your work, what is the concern about 0:03:51.080 --> 0:03:55.360 whether or not this new levee on remittances passes, especially 0:03:55.360 --> 0:03:58.640 for some of these students who aren't even making a 0:03:58.680 --> 0:04:00.760 lot of money yet aren't even worthy looking full time. 0:04:00.800 --> 0:04:01.560 What's the concern. 0:04:02.040 --> 0:04:05.560 The big concern is that this affects how much can 0:04:05.600 --> 0:04:11.920 be sent home because remittances are really currently they finance consumption, right, 0:04:12.000 --> 0:04:15.960 it is the cousin who needs skool fees that these 0:04:16.000 --> 0:04:22.040 resources go to. And by taxing remittances, particularly from non citizens, 0:04:22.040 --> 0:04:25.359 which seems to be where the focus will go, it 0:04:25.400 --> 0:04:30.640 will make those flows lower than have been. My sense 0:04:30.960 --> 0:04:33.360 is it will not discourage them. It will just take 0:04:33.400 --> 0:04:38.400 them underground and enable the flows to happen in ways 0:04:38.400 --> 0:04:42.360 that are harder to track and therefore perhaps harder to 0:04:42.839 --> 0:04:47.679 drive into a more structured vehicle for organized development. Because 0:04:47.720 --> 0:04:50.559 in fact, that is the big question, which is, given 0:04:50.640 --> 0:04:55.120 the scale of remittances, what are the avenues by which 0:04:55.839 --> 0:05:01.680 those resources can be channeled into programs that advance development 0:05:02.080 --> 0:05:07.640 separately from or in addition to supporting consumption across families. 0:05:07.880 --> 0:05:10.279 And we know that a number of governments have actually 0:05:10.320 --> 0:05:12.920 been trying to do away with a lot of the 0:05:13.000 --> 0:05:16.560 so called black markets or underground networks as you allude 0:05:16.600 --> 0:05:20.480 to there Lydia. What's the link here to higher education 0:05:20.680 --> 0:05:23.599 and potentially some of the trends that we've been seeing 0:05:24.400 --> 0:05:27.719 as it pertains to African students and higher education in 0:05:27.760 --> 0:05:28.640 the US. 0:05:29.760 --> 0:05:32.719 So there's a number of headwinds facing higher education in 0:05:32.760 --> 0:05:36.760 the US. As you know, the current administration has put 0:05:36.880 --> 0:05:41.800 a pause in neil visa appointments for students, and this 0:05:41.880 --> 0:05:45.480 is the season where o behalf of students who are 0:05:45.480 --> 0:05:50.400 holding offers to US universities go for their appointments. Is 0:05:50.440 --> 0:05:53.080 a lot of advocacy going on in the US to 0:05:54.040 --> 0:05:57.880 get that window of visa appointments to be open again. 0:05:58.520 --> 0:06:03.440 The challenge with visa appointments not being available is that 0:06:03.520 --> 0:06:06.479 many students who hold offers in the US also hold 0:06:06.520 --> 0:06:10.159 offers elsewhere, and so you're likely to see this massive 0:06:10.200 --> 0:06:14.240 talent outflow that was initially distinct from to the US 0:06:14.640 --> 0:06:21.279 head elsewhere. What also is happening globally is an awareness 0:06:21.360 --> 0:06:25.160 of what's going on demographically, which is that Africa has 0:06:25.320 --> 0:06:29.320 the largest number of college age students, fastest growing number 0:06:29.360 --> 0:06:32.160 of college age students, and they're looking to take their 0:06:32.200 --> 0:06:35.280 talents to places that welcome them. So we are likely 0:06:35.360 --> 0:06:38.320 to see a decline, at least in the short term 0:06:38.680 --> 0:06:41.000 of the numbers coming to the US, which will be 0:06:41.040 --> 0:06:44.640 a shame because we had really started seeing African numbers 0:06:44.760 --> 0:06:47.800 rising year after year. Having said that this is a 0:06:47.839 --> 0:06:50.839 trend that there's nothing to be done about right. The 0:06:50.880 --> 0:06:56.039 trend of African youth looking for opportunities globally is with us. 0:06:56.200 --> 0:06:59.800 It's not going anywhere global university is particularly in the OIC. 0:07:00.040 --> 0:07:03.120 You're facing a demographic cliff. They need these young people, 0:07:03.600 --> 0:07:06.880 these young people looking for opportunities there. So the movement 0:07:06.920 --> 0:07:09.680 will continue. It may be facing head winds right now, 0:07:09.720 --> 0:07:12.640 but we do know that it will continue after the 0:07:12.680 --> 0:07:13.400 current season. 0:07:13.800 --> 0:07:16.440 Lydia, thanks so much for joining us and for sharing 0:07:16.480 --> 0:07:19.400 those insights. It's great to have you. And let's turn 0:07:19.560 --> 0:07:23.720 to Nigeria now. Anthony os Brown is joining us. Anthony, 0:07:23.840 --> 0:07:27.800 so you oversee Nigeria, which is one of the largest 0:07:27.800 --> 0:07:31.720 recipients of remittance money. Can you put into context just 0:07:31.800 --> 0:07:36.280 how important these funds are for the economy and for Nigerians. 0:07:36.880 --> 0:07:42.360 Relitiances are quite significant to the Nigerian economy. We get 0:07:43.080 --> 0:07:49.560 totally somewhere around twenty to twenty five billion annually from remediances, 0:07:49.760 --> 0:07:52.520 and a good chunk of this comes from the US. 0:07:52.800 --> 0:07:55.840 I'm not too sure the exact percentage, but it could 0:07:55.840 --> 0:07:58.320 be close to half of it coming from the US 0:07:58.320 --> 0:08:01.320 because of the large nature and the esperate community in 0:08:01.360 --> 0:08:04.600 the US, and a lot of this money going to 0:08:04.800 --> 0:08:08.640 supporting very poor families. As you know, Nigeria has almost 0:08:08.800 --> 0:08:11.960 half of this population that are very poor. So those 0:08:12.000 --> 0:08:14.760 who are able to get out of the country send 0:08:14.960 --> 0:08:19.400 bondly back home to their families to support them. Healthcare 0:08:19.480 --> 0:08:23.000 is a big portion of remittance expenditures and then a 0:08:23.080 --> 0:08:27.400 good part of it goes into real estate investments, support schooling, 0:08:27.800 --> 0:08:32.280 education training, all forms of vocational training. A lot of 0:08:32.360 --> 0:08:36.200 families depend on their people are brought to support, especially 0:08:36.240 --> 0:08:41.560 the aged population, because there's no social security in Nigeria. 0:08:41.679 --> 0:08:45.200 So yeah, so remitiancs is just plas a key role 0:08:45.240 --> 0:08:48.760 in the ecadomy and another key role in places even 0:08:48.880 --> 0:08:50.800 in supporting currency stability. 0:08:51.200 --> 0:08:54.840 And and if you could explain that a bit more, 0:08:55.400 --> 0:09:00.920 how remittances and potentially a decline and remittances would affect 0:09:01.040 --> 0:09:03.880 the NYRA and the stability that we've seen over the 0:09:03.880 --> 0:09:05.080 past few months. 0:09:05.480 --> 0:09:09.000 The Central Bank sees remittances as a key part of 0:09:09.040 --> 0:09:12.880 its foreigners change reserves accumulation policies. So last year I 0:09:12.960 --> 0:09:16.720 set the target of at least getting remittances through the 0:09:16.800 --> 0:09:20.960 official channels rising to about six hundred million currently to 0:09:21.000 --> 0:09:23.640 about a billion dollars a month. Because a lot of 0:09:23.720 --> 0:09:27.839 remediencies can also come introue on official sources. Has a 0:09:28.000 --> 0:09:32.560 history of unofficial power market, foreigners change market, and because 0:09:32.600 --> 0:09:36.079 of official policies, most of the money remittance money was 0:09:36.120 --> 0:09:39.040 going through the power market. But now the Central Bank 0:09:39.080 --> 0:09:42.760 has set a direct policy of trying to attract remittances 0:09:42.800 --> 0:09:46.360 through the official market, and that basically is to use 0:09:46.400 --> 0:09:51.160 it to support currency stability. So if remittences drop through 0:09:51.200 --> 0:09:54.400 the official sources, you could see it possibly impacting on 0:09:54.760 --> 0:09:57.160 currency neyrastability locally, So. 0:09:58.240 --> 0:10:00.760 Not something they'll they'll want to have to deal with 0:10:00.920 --> 0:10:05.920 after the past few years of relative instability and volatility. Anthony, 0:10:05.960 --> 0:10:08.400 stick with us when we come back. We're going to 0:10:08.400 --> 0:10:10.760 dig into more of the wider effects of some of 0:10:10.760 --> 0:10:14.840 these policies on US Africa relations. We'll be right back. 0:10:20.800 --> 0:10:24.000 Welcome back. Today we're looking at the proposed tax on 0:10:24.160 --> 0:10:29.480 remittances and the impact it could have on countries across Africa. Anthony, 0:10:29.720 --> 0:10:33.920 we've talked a lot on this podcast about the increasingly 0:10:34.040 --> 0:10:38.600 fraught relations between the US and several countries across the continent. 0:10:39.320 --> 0:10:43.240 How do you see this policy likely to change things, 0:10:43.400 --> 0:10:47.760 especially considering some of those factors you pointed there remittance 0:10:47.840 --> 0:10:52.640 is very important for the livelihoods for a number of Africans. 0:10:53.040 --> 0:10:57.319 Yeah, I think this just adds to be increasingly negative 0:10:57.360 --> 0:11:00.480 perception of the US. They just close down you said, 0:11:00.640 --> 0:11:03.640 they just closed down Voice of America, which was a 0:11:03.800 --> 0:11:08.040 key part of the media network, especially in northern Nigeria. 0:11:08.720 --> 0:11:12.360 So US is a big destination for US and Nigeria 0:11:12.440 --> 0:11:17.160 students who want to study abroad and even for people 0:11:17.160 --> 0:11:20.839 who want to leave the country and everything. But increasingly 0:11:20.920 --> 0:11:23.400 the latest policies from the art of the US has 0:11:23.440 --> 0:11:26.520 made US less attractive for a lot of people. And 0:11:26.559 --> 0:11:29.400 this just adds to it is the own fairness of 0:11:29.480 --> 0:11:34.000 the whole process. The fact that the people who have 0:11:34.160 --> 0:11:38.240 worked and are taxed, are already taxed officially, will be 0:11:38.360 --> 0:11:42.040 taxed a second time. So that's that alone. Already they're 0:11:42.040 --> 0:11:45.520 spending about six percent on an average cost to send 0:11:45.520 --> 0:11:47.520 money locally. By the time you add this three point 0:11:47.520 --> 0:11:50.600 five percent tax, you're looking at ten percent of So 0:11:50.679 --> 0:11:53.960 anybody sending a thousand dollars is losing by one hundred dollars. 0:11:54.000 --> 0:11:57.240 That will make the US a bit less attractive for 0:11:57.320 --> 0:12:01.080 people who want to send money back home and students generally. 0:12:01.160 --> 0:12:04.439 That makes it quite unattractive because most students while they're 0:12:04.720 --> 0:12:07.920 schooling also work and send money back home. So it 0:12:08.080 --> 0:12:11.800 just adds to the perception of US as less of 0:12:11.880 --> 0:12:17.640 an attractive destination for Nigerians and even the country has 0:12:18.000 --> 0:12:20.560 less influential in Nigerian affairs. 0:12:20.720 --> 0:12:24.000 Have we heard anything from officials at this point, Anthony, 0:12:24.040 --> 0:12:26.240 And do you expect will hear anything. 0:12:27.559 --> 0:12:31.200 I don't think officially you hear anything. I don't think 0:12:32.080 --> 0:12:35.800 the government will react in any way. The government will 0:12:35.840 --> 0:12:40.240 want something different, but then if that's happening, they may 0:12:40.320 --> 0:12:43.640 not officially take a stand. But I think what you 0:12:43.640 --> 0:12:48.200 will see is people they average Nigeria looking for alternatives 0:12:48.320 --> 0:12:51.680 on wa are to go to school on Europe is 0:12:51.800 --> 0:12:54.760 likely to be a bigger destination going forward, and they 0:12:54.880 --> 0:12:58.760 possibly even Asia. Increasingly Nigerians are looking at Asia and 0:12:58.840 --> 0:13:03.480 alternatives for schooling. Most Nigerians prefer those who can afford 0:13:03.520 --> 0:13:06.280 it at the higher level, mostly the middle income Nagerians 0:13:06.480 --> 0:13:09.280 prefer their children's schooling outside the country, at least when 0:13:09.320 --> 0:13:13.040 comes university and master's levels. So with these policies from 0:13:13.080 --> 0:13:16.760 the US will likely see most of more Nigerians students 0:13:16.760 --> 0:13:20.360 going towards Asia and possibly Europe. 0:13:21.559 --> 0:13:23.839 Anthony. Thank you so much for joining us and for 0:13:23.920 --> 0:13:27.960 your reporting, and thanks also to doctor Lydia kmunto Bossire 0:13:28.559 --> 0:13:32.080 for speaking with us earlier. You can read all of 0:13:32.120 --> 0:13:36.280 our coverage of President Trump's tax bill across Bloomberg platforms. 0:13:36.360 --> 0:13:41.680 Now here's some of the other stories from the region 0:13:41.800 --> 0:13:46.920 we've been following. This week, South Africa's National Assembly approved 0:13:47.000 --> 0:13:50.840 the Treasury's fiscal framework, bringing the adoption of the annual 0:13:50.880 --> 0:13:54.720 budget a step closer after months of wrangling over tax 0:13:54.760 --> 0:14:00.760 increases and logistics. Giant DHL Group plans to vest about 0:14:00.800 --> 0:14:05.040 five hundred and seventy five million dollars in healthcare services 0:14:05.040 --> 0:14:07.560 in Africa and the Middle East over the next five 0:14:07.640 --> 0:14:12.679 years to capitalize on China's push into the regents. You 0:14:12.720 --> 0:14:16.160 can find these stories on Bloomberg platforms, including in the 0:14:16.200 --> 0:14:18.760 Next Africa Newsletter. We'll put a link to that in 0:14:18.800 --> 0:14:25.560 the show notes. This program was produced by Adrian Bradley 0:14:25.640 --> 0:14:28.640 and Tiba Adebio. Don't forget to follow and review the 0:14:28.720 --> 0:14:33.040 show wherever you usually get your podcasts. I'm Jennifer's Abasanta. 0:14:33.200 --> 0:14:35.560 Thanks as always for listening. We'll see you next time.