The latest policy of the Nigerian government impacting the sponsorship of skilled foreign workers for employment in Nigeria is a new annual expatriate employment levy of up to $15,000 payable by Nigerian companies for each skilled foreign worker (the “Levy”).[1] This policy update attempts to rationalise the Levy for the benefit of foreign skilled workers and their Nigerian employers.
Context
Nigerian companies frequently find it necessary to employ foreign skilled workers to fill local skill and capacity gaps. As of the time of this briefing, the Ministry of Interior (“MoI”) is yet to publish hard data on the size of and movements in the market for foreign skilled workers as well as the current net business migration figures. However, Nigeria has had a historical skills gap problem, coupled with high unemployment, which appears to be widening[2]. According to the National Bureau of Statistics, the rate of unemployment as of Q2 2023 was 4.2%[3].
The long-standing policy approach of the Nigerian Government to addressing skills shortage and building capacity, has been (a) to impose a local content policy in certain sectors, requiring certain minimum shareholding and contract values be allocated to only Nigerians; and (b) to impose a legal obligation on Nigerian employers of foreign skilled workers to ensure, monitor and report the transfer of technical skills from skilled foreign workers to Nigerians.
What is the Expatriate Employment Levy Card (“EEL Card”)?
According to the MoI, foreign skilled workers in Nigeria will now receive an EEL Card, which is a mandatory document like a passport, and will be required at the time of lawful exit and entry into Nigeria.
What is the Nigerian Government saying with the EE Regulations & Levy?
Based on our review of the EE Regulations, the Nigerian Government appears to be saying that:
- The Nigerian Government wants to digitize the filing of monthly expatriate returns and compliance monitoring.
- The Nigerian Government wants to closely regulate/plug the gaps in the grant and administration of expatriate quotas.
- The Nigerian Government is calling on skilled Nigerian workers, home and abroad, to “step up to the plate”.
- Employers of foreign skilled workers still employ a disproportionate number of expatriates, notwithstanding that the relevant skills may be available locally, hence the need to “promote skills transfer and knowledge sharing”[4]
- Employers of foreign skilled workers are not prioritizing the transfer of technical skills to Nigerians, hence the need to “promote skills transfer and knowledge sharing”.[5]
- The earnings of expatriate employees are significantly higher compared to those of their local counterparts, who may be more qualified, hence the need to “balance economic growth and social welfare[6]”.
- The Nigerian government wants to open up more employment opportunities for Nigerians especially given the increasing migration of talent from Nigeria[7]
It should be noted that imposing a fee as a means of deterrence or to shape behaviour, is not uncommon in migration policy & regulation. In July 2023, the UK Government announced an increase in both headline fees and the health surcharge. On 4 October, work and visit visa fees went up by 15%, family visas, settlement and citizenship by 20%, and student visas by 35%. For example, settlement increased from around £2,400 to £2,900. The health surcharge rose by 66% to £1,035 a year in February 2024.[8]
What is the EE Platform?
The EE Platform is hosted at http://eel.interior.gov.ng. The EE Platform is not responsive as of the time of the briefing for a review.[9] Based on the information available in the EE Regulation, it appears that the primary purpose of the EE Platform is to digitize the filing of expatriate returns and compliance monitoring.
It should be noted that, the obligation on Nigerian companies to report expatriate activity, skills transfers and to file expatriate quota returns, is not a new regulatory requirement. At the minimum, expatriate quota licenses are typically issued on the condition that the relevant employer will (a) place 2 Nigerian undergraduates with a minimum qualification of BSC/HND in the relevant profession or discipline to understudy a foreign skilled worker (b) file a return showing the names of such Nigerians; and (c) ensure the registration of all foreign skilled workers with the relevant professional regulatory body in Nigeria.
Previous attempts have been made to digitise the filing process. For instance, as of January 2022, the MoI had discontinued the manual submission of monthly returns on the utilisation of expatriate quotas and notified that filings were to be made via the Ecitibiz platform[10].
When is the deadline for compliance?
The last date for compliance with the EE Regulation is 15th April 2024.
Is the Levy Legal?
The legality of the Levy is doubtful. Although the jurisprudence is not as clear in Nigeria, the Levy appears to be a form of disguised tax on Nigerian companies. The legal reasoning here lies in the legal distinction between a fee and a tax. A tax is a mandatory obligation imposed for public purpose without reference to any special benefit to be conferred on the payer of the tax. There is no element of quid pro quo between the taxpayer and the public authority[11]. On the other hand, a fee is a payable as consideration for the conferment of a special benefit to the consumer of a service and is often imposed as part of public administration. As a general rule, taxes must receive legislative approval, to become legally binding.
To the extent that, the Levy is a mandatory payment and does not appear to be a consideration for the conferment of a special benefit on employers, there is some merit in the view that the Levy is actually a form of disguised tax and requires legislative approval to be legally enforceable.
This view is reinforced by the language of the EE Regulation. For instance, the EE Regulation refers to the Levy as a “contribution”. The Levy is also referred to, as a “fiscal measure” suggesting that the Levy is a form a disguised tax.
Who is Exempted from Paying the Levy?
- Expatriates in Nigeria on a seasonal or short-term basis provided they do not stay for more than 183 days within a year.
- Accredited staff of diplomatic missions and foreign government staff.
Priority Sectors of Focus
The priority sectors of focus for the application of the Levy includes:
- Construction
- Information and Communications Technology
- Oil & Gas
- Telecommunications
- Agriculture
- Shipping
- Healthcare
Comments
It is probably too early to project the success of the new EE policy. However, what is clear is that, the Nigerian Government wants to compel Nigerian employers of foreign skilled workers to rethink their expatriate employment strategy and to (y) only employ foreign skilled workers, where there is no Nigerian available; (z) have a succession and capacity-building plan for Nigerians to take up the roles currently occupied by foreign skilled workers.
For Nigerian companies and their compliance teams, monitoring and reporting skills transfer from expatriates is increasingly a key compliance risk area. It may be prudent for compliance teams to pursue a blended compliance approach that involves an internal immigration compliance function as opposed to completely outsourcing immigration compliance.
This publication is not intended to provide legal advice and is not prepared with a specific client in mind. Kindly seek professional advice specific to your situation. You may also reach out to your usual Balogun Harold contact or contact us via support@balogunharold.com for support.
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[1] The amount payable for a n expatriate who is a director is $15,000, whilst that payable for other categories of expatriates is $10,000. Details of the EE Levy is contained in the Expatriate Employment Levy Handbook ( the “EE Guidelines”)
[2] See https://leadership.ng/80-of-nigerian-firms-experience-it-skills-shortage-sap-africa/ https://dailytrust.com/why-skill-gap-in-construction-industry-is-widening-ceo/
[3] https://nigerianstat.gov.ng/elibrary/read/1241429
[4] Section 2.1.1. of the EEL Regulations
[5] Section 2.1.1. of the EEL Regulations
[6] Section 2.1.2.
[7] Section 2.1.4
[8]https://researchbriefings.files.parliament.uk/documents/CBP-9859/CBP-9859.pdf
[9] The EE Platform was accessed on March 2nd, 3rd and 4th 2024
[10] https://interior.gov.ng/press-release/updated-guidelines-on-administration-of-expatriate-quota-and-other-business-instruments/
[11] (See Findlay Shirras on “Science of Public Finance”, Vol. P. 203.)
