No Taxes and Earning In Foreign Currency, The Double Advantage Of The Hidden Nigerian Worker

 

Tax is the most common and important government intervention to redistribute income among the population. It is an attempt to share the burden of economic growth through a progressive taxation system. The tax burden on the upper income groups is higher, and the burden is lower for lower income groups. There are many benefits of paying taxes. They help in the development and maintenance of infrastructure, like roads, and they can even help to create or maintain the institutions needed for the rule of law and the functioning of the democratic process. Taxes are the government's revenue for financing public spending, including building roads, school buildings, and hospitals, and for funding local government services, including police and fire departments, parks and playgrounds, and public libraries.[1] So it can be a big issue when taxes for one reason or the other are not being paid as they should be. This is the case for the Hidden Nigerian Worker earning his wages in foreign currency.

With the explosion of global online job opportunities today, it's no surprise that many Nigerian youths have turned their attention that way and are now raking in salaries in foreign currencies. These opportunities can be as flexible was a freelance job or a foreign based contract hire to a more structured full time employment position. This is a win-win situation to both company and worker. The benefit to the company is the fact that outsourcing the job to a Nigerian abroad and not a citizen in their country will reduce the cost of the pay-out but with the huge Forex price difference as a result of the inflation the pay-out when converted to the Naira is about a 3/4 months pay day equivalence for the average Nigerian. This enormous pay-out is already an uneven advantage to the Nigerian worker but when the realization that due to the pay-out being paid directly to the workers salary, there is no tax on it, it makes the advantage tend towards seemingly unfair, maybe even bordering on the edge of legal. The blame for this can hardly be placed at the feet of the company or the worker because given that the job is sometimes a freelance/contact hire or the fact that the company expects the worker to pay taxes on the money the taxes are not removed but added to the wages and sent to the worker expecting him to remit it afterwards but the worker is not aware of the policy of paying taxes on his foreign earning and there is rarely a conversation between both parties about taxes leading to the situation going unnoticed by both.

This loop-hole in the Nigerian tax system is a remarkable loss to the government as millions of Naira move under the radar directly to the workers bank account and the government is none-the-wiser. An example of such opportunities was in 2017 where some of the remote workers on the online testing platforms were raking in payout of about 400 to 600 Euros monthly and at that time the Forex rate was 400 Naira to 1 Euro. This is by no means an exceptional case as many freelance hires on the platform and other such testing companies were Nigerians working remotely to test apps on devices and log discovered bugs for a fee and given the hard work ethics of the Nigerian worker it was no surprise that many of the test cases showed Nigerians logging many high value bugs that were approved for payments daily (This situation has since been remedied by the online testing company of their own volition without the knowledge of Nigerian government but a question can be asked if the taxes should be paid to the foreign or Nigerian government or shared based on international treaties). They were other opportunities like freelance writers that were writing articles for many information/news agencies, software engineers that build software remotely, online international recruiters, Forex traders, online/remote marketers etc. Sometimes this situations occur because the employees are new hires that have been employed by companies abroad and the company intends to relocate them but the process sometimes may take about 2/3 years and during this time the employee/worker is being paid while in Nigeria.

Regardless of who is responsible it is evident that the loop-hole needs to be closed and the taxes for these pay-outs needs to be remitted appropriately to the Nigerian government. With the direction of global trends these opportunities will only increase and many more Nigerians will work and earn their wages this way. So it is imperative that this fix comes much sooner than later. There are international tax laws i.e treaties between countries that aims to avoid double taxation, one way to resolve this will be to make the companies hiring Nigerian workers aware of this and either remove the taxes and send them to the government or ask the workers to get authorized document to confirm taxes payment. Another may be for the government to be aware of regular foreign currency payments of specific amounts paid monthly to individuals, especially by foreign companies. Having these loss taxes and putting them to work can improve the Nigerian economy in many ways, some of which are as follows: Taxes fund public infrastructure and services. A government can utilize infrastructure as a force multiplier for long-term economic growth. Taxes are also used for social development and welfare programs, including public health and nutrition, education, and rural development programs. Taxes fund education. For example, in Nigeria, where illiteracy is a major problem, the government needs a lot of money to provide quality education; not only in urban areas but up to the grass root levels. This includes public and private expenditure on education, including spending on school infrastructure, teachers' salaries, and research, development and innovation. Taxes secure the country's borders. This includes expenditures on equipment and personnel, defense research and development, defense imports, international military cooperation, and international peace-keeping operations. Taxes fund salaries and pensions of government employees. This includes wages and pensions of public sector employees such as central government employees, state government employees, and local government employees. Taxes pay the principal and interest on government debt. The government of Nigeria has a large external debt and a sizable portion of its outstanding debt is denominated in foreign currency. As per the latest data from the finance ministry. Therefore, the government has to borrow money from the international financial markets on which interest is also to be paid.[1]

References

[1]	creditmantri, "Benefits Of Taxes," CreditMantri Finserv Private Limited, 2025. [Online]. Available: https://www.creditmantri.com/benefits-of-taxes/. [Accessed 29 05 2025].