Trump tax will cost some African senders 10% of remittance
According to the Mo Ibrahim Foundation, the average cost of sending remittances to Africa is 7.4%, even before the Trump tax kicks in.
Lydia Namubiru
American legislators passed President Donald Trump’s so-called “big beautiful bill” with a provision that non-citizens who send money out of the United States will pay a 3.5% tax on their remittances. New analysis by The Continent shows that in at least eight African countries, the tax will push transaction costs to 9% or more of the amount moved, especially for people sending and receiving small amounts.
The analysis is based on World Bank data on what it cost to send $200 and $500 from the US to several African countries between October and December 2024.
This tax rate goes against every goal that multilateral groups have been working towards on remittance costs. The United Nations has asked countries to reduce the cost of cross-border remittances to 3% of the amount sent. G20 countries initially agreed to work towards reducing it to 5% and later adopted the UN’s more ambitious goal.
For Africa, this goal is important because remittances – which amounted to $90-billion last year – are a crucial alternative to dwindling and top-down foreign aid ($73-billion in 2023), and expensive loans.
Yet, high transaction costs still form a kind of “African premium” even on this source of funding. According to the Mo Ibrahim Foundation, the average cost of sending remittances to Africa is 7.4%, even before the Trump tax kicks in.
But while all African countries benefit from remittances, the Trump tax will worry some more than others, depending on whether or not the US is a significant source for them. Nigerians, who receive about $6-billion in remittances from the US, will find that the Trump tax exceeds all other transaction costs – operator fees and exchange rate margins – even for an amount as low as $500.
To add insult to injury, the Trump administration has included seven African countries among those whose citizens are banned from travelling to the US: Chad, the Republic of the Congo, Equatorial Guinea, Eritrea, Libya, Somalia and Sudan. Citizens of Burundi, Sierra Leone and Togo will also face additional visa restrictions beginning on Monday.