#relationshipscams | #dating | Remittances: Legal Regulatory And Commercial Issues In Diaspora Transactions – Tax



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“Foreign investors pull out N1. 77 tr
over insecurity”

Front Page Headline, The
Guardian,
10.10.2019

“Nigeria’s biggest export goes unnoticed as oil
steals shine of emigrants.”

Front Page Headline,
BusinessDay, 10.10.2019

Introduction

The two recent headlines quoted above are res ipsa
loquitor
: very self-explanatory about Nigerian foreign
investment vs diaspora remittances trends and impact,1 and will set the tone for this
article.

It is now widely acknowledged that there is hardly any country
in the world where there are no Nigerians. Many authoritative
sources estimate that between 15 and 17 million Nigerians are in
the diaspora.2 The Obasanjo
administration in the early 2000s recognised ‘Nigerian
diasporans’ as a potent force that could be institutionally
galvanised to contribute to national development. The successor
administrations of Presidents Y’aradua and Jonathan did not
pursue the diaspora agenda with as much passion, but the Buhari
administration (especially in the 2nd term), apparently
wants to up the ante.

The Senate confirmation of Hon. Abike Dabiri-Erewa, as the
Executive Chairman of the newly created Nigerians in Diaspora
Commission (NIDCom) in May 2019 is reflective of such intent.3 In our view, institutionalising
strategies to involve diasporans as partners in progress for
Nigeria’s development is a no-brainer, given: the need to
continually stimulate the economy by attracting foreign and local
investment; government’s budgetary pressures vis a vis
huge infrastructural and social financing needs; strategic
diversification of the economy etc. A government-driven diaspora
strategy could be ‘a secret weapon’, just like as in the
recent past when pension reforms unlocked massive economic value in
mobilising pension funds for national development.4

This article discusses the historic and current trends (policy,
financial flows, transactions, etc) and attempts to periscope the
future, whilst offering thoughts on the possibilities of an
optimised diaspora strategy.

Nigerians in Diaspora: Emigration
Rationales

Due to a host of factors, Nigerian emigrant numbers have been
trending upwards, especially since the late 1980s; and the figures
are not likely to wane, anytime soon. Apart from professionals
leaving in droves for better career and compensation prospects
abroad, there are also significant numbers of low/unskilled
‘undocumented’ emigrants – all driven by the potential
‘benefits’, including ability to help improve the lot of
family members back home.

The grim picture of the ‘harsh’ Nigerian environment
symbolised by rising levels of poverty, unemployment, inflation
etc, (exacerbated by historic corruption and mismanagement),
continues to make Nigerians ready to take the most extreme risks to
escape from the ‘hell’ that Nigeria represents. The upsurge
in the dangerous trans-Saharan/Mediterranean road/boat trips to
Libya and Europe respectively, better illustrates this point.5 Increasing number of fatalities has
not discouraged in the least, the higher number of potential
Nigerian emigrants. This is not helped by the (wrong) perception
that almost everywhere else presents better prospects to break out
of the cycle of poverty.6

The resilient, never-say-die, entrepreneurial ethos and positive
(‘happy’) spirit of Nigerians also stand them in good stead
to overcome adversity, help them settle in well, and mostly become
successful in their host countries. For example, the US Bureau of
Statistics and Census reported that Nigerians are the most educated
immigrants in the United States, and they have the highest
education attainment rates.7 The
result is that Nigerian diasporans (irrespective of status or
professional standing), with their earnings constitute a potent
economic force through home remittances and as skilled
‘repatriates’
.

Diaspora Remittances: Dimensioning the Size of the
Opportunities

According to a commentator, “…Nigeria’s
remittances in 2017 alone were larger than the combined foreign
direct investment (FDI) brought into the country in the last

ten years, as recorded by the National Bureau of Statistics
NBS. This is due to a combination of factors
including more Nigerians
exiting the country to well-paying jobs abroad
and a poor investment climate unwelcoming to
foreign investors.”
8 Also
by the World Bank (WB)’s Annual Remittance
Data
Update (April 2019),
Nigerian Diaspora’s remittance increased from US$22 billion in
2017 to US$25.1 billion in 2018.9
The WB also ranked Nigeria, with US$24.5 billion, as the
6th highest recipient of remittances globally in 2019,
after India, China, Mexico, Philippines and Egypt.10

Contrasting remittances data against other sources of
revenue gives a most humbling view of how important these
remittances are to the Nigerian economy.
For instance, whilst
NBS published data reflects N1.17 trillion as the 2018 internally
generated revenue (IGR) by Nigeria’s 36 States and the Federal
Capital Territory (FCT), Nigerian diasporans remitted over N9
trillion (or US$25.1 billion) in 2018, an amount higher than
Nigeria’s 2018 gross oil revenue (US$18.2 billion). The data
also reveals that the 2018 Nigerian diaspora remittances from the
USA alone (US$7.2 billion) outstripped the FG’s 2019 capital
expenditure budget of US$6.7 billion.11

Another analysis shows that diaspora remittance of US$25.1
billion in 2018, was 84% of the FG’s 2018 total budget (of
US$29.9 billion), and 1,100% more than the US$2.2 billion FDI into
Nigeria in 2018. Further analysis reveals that in the same 2018,
diaspora remittances contributed US$17.6 billion and US$7.6 billion
respectively, to local consumption and investment. According to
Afrinvest Research, the per capital diaspora remittance
for 2018 stood at US$1,475.12 This
figure almost squares up with Nigeria’s GDP per capita at US$1,
951.271 in December 2017.13

In a sense, diaspora remittances also provides some consolation
(even if it is cold comfort), for the skills gaps and other
“inconveniences” the country suffers as a result of her
human capital loss to other countries.14 Hopefully if optimally deployed,
diaspora remittances will contribute in addressing many of the
macro-economic and socio-political inhibitions that constrains many
resident Nigerians from achieving their potentials.15

Legal Regulatory Commercial Issues

Channels of Diaspora Remittance: Formal vs. Informal &
Tax Impact

Channels of diaspora remittance can be either formal or
informal; the regulatory system of a country determines the
formality or otherwise of a channel. Formal channels entails the
use of legally recognised and documented means to transfer funds to
the home country such as banks/other recognised non-financial
institutions, use of internet, mobile phone payment systems, money
transfer operation, Automated Teller Machine (ATM) card, and postal
network.16 The informal mode
entails the use of non-regulated banking and other financial
channels; most transactions carried out through informal channels
are not recorded and do not form part of the Gross National Income
of the home country.17

Remittances received in Nigeria through the formal channels are
tax exempt, for example when non-resident Nigerians transfer
foreign currency (forex) into their forex domiciliary accounts with
Nigerian banks.18 The tax exempt
status is achieved by the combined operation of
sections 19, 75 and Third
Schedule,
Personal Income Tax Act
(PITA).
19

Generally, non-resident Nigerians are not liable to Nigerian PIT
to the extent that they are not “individuals deemed to be
resident for that year in the relevant State under the provisions
of this Act”
(section 2(1)(a));
and they do not “derive income or profit from
Nigeria”
(section 2(1)(b)(iv)).
Nigerian tax system does not tax non-resident citizens
(individuals) on their worldwide income.20 From the foregoing, diasporans
would be liable to Nigerian tax only in respect of
their Nigerian sourced income –
which has not
been also specifically exempted – for example, investment returns
on government securities.21

It is arguable whether the 183 day rule will apply to diaspora
Nigerians – if like expatriates, they were to spend more than
183 days in Nigeria in any twelve month period or calendar year.22 Our view is whether such Nigerian
diaspora is a dual citizen or not, the 183 day rule will not apply,
he will be liable to Nigerian tax once he earns Nigerian income
(for example in employment or through consultancy services) whilst
in Nigeria, so length of stay would be irrelevant. In that sense, a
Nigerian even with dual nationality is not an expatriate for the
purposes of the 183 days rule.

Whilst arguably non-resident Nigerians are not generally liable
to Nigerian tax as explained above, use of formal channels could
make assurances doubly sure, as opposed to informal channels. The
reality though is that depending on the size of particular
(individual) remittances, informal channel may be the more
pragmatic and convenient. A friend or relative is travelling to
Nigeria, and brings cash: (a) for his own use including gifts to
family and friends and/or (b) cash he is asked to give to named
recipients by his fellow diasporans, who also returns the favour
when they too are visiting Nigeria. Often the recipients may be
illiterates or rural dwellers and both the diaspora visitor and
recipients may patronise informal bureau de change to convert the
forex into Naira.

The fact that such ‘courier’ services will usually not
attract any charges (unlike formal remittance where a percentage of
the sum would be paid as commission), makes it very popular. The
third party recipients may not report it as income in their tax
returns (if they file returns at all), especially if the money was
meant to execute some assignments on behalf of the sender. It
is also possible that the cash may never interact with the banking
system from the time it is received till all of it is spent: cash
handed over to recipient, who changes into Naira at parallel
market, pays for purchases or artisans in cash or makes deposit
into their account (source of money as foreign remittance not
necessarily disclosed, etc)
.

Although likely to escape capturing by formal data, the impact
of such spending on the economy is still poignant.23 Note however than Nigerian law
requires that forex in cash and equivalent beyond certain limits
must be declared at the point of entry into Nigeria, otherwise the
diasporan could be exposed to charges of money laundering or
potential confiscation of the cash.24

Similarly, formal channels of remittance encourage credible and
measurable investment in Nigeria’s economy, which aligns with
Strategy No.9 Economic
Recovery Growth Plan (ERGP) 2017-2020
25 and section
8(c)
Nigerians in Diaspora Commission
(Establishment, etc) Act (NDCA) 2017
.26

Apart from safety, one major benefit of formal channel is the
24/7 availability or access to such channels unlike when
remittances have to sometimes wait till a diasporan is traveling to
Nigeria. To some, the favourable security and convenience
considerations of formal channels may make them consider the
related transaction costs as worthwhile. The WB estimates that
Africans pay on average about 9.5% of the total transfer sum in
fees, and up to 20% in some corridors.27 However, these charges cannot be
compared to the loss and agony suffered in circumstances when the
entire remittance does not get to the intended recipient,
especially as a result of conversion or fraud.

An illustrative fraud case was Sonoma v.
IGP
,28 where the
accused fraudulently collected some money from Ambassador Sam Edem
with the intent to conceal it.29
Often times, because the courier is either family or friend, the
matter may not be reported to the Police or prosecuted. However,
the use of digital money transfer services and mobile money reduces
formal remittances charges, and should make them more attractive
relative to risks of informal remittances. Dishonesty around
informal remittances could cumulatively result in many diasporans
losing interest in investing in Nigeria.30

Formal vs. Informal Remittance Channels: Risk Management
Issues

Factors contributing to the higher costs of informal include:
de-risking measures taken by commercial banks and exclusive
partnerships between national post office systems and a single
money transfer operator. These factors are constraining the
introduction of cheaper and more efficient technologies – such as
internet and smartphone apps, and blockchain – in remittance
services. In two recent reports submitted during the G20 Summit
2018, the Financial Stability Board (FSB), an international body
that monitors and makes recommendations about the global financial
system, found that banks still perceive the remittance sector as
high risk, and that the closing of bank accounts in countries or
sectors deemed to pose a high risk of money laundering or terrorist
financing continued into the first half of 2017.31

Through the FSB, a four point action plan were earmarked on
correspondent banking in response to increasing international
concern regarding the effects of de-risking on remittance flows.32 Recent high profile arrests of
Nigerians involved in scams especially in the USA and who sent
substantial sums to Nigeria has not helped matters in this regard.
In fact many money transfer services like Western Union suspended
services to Nigeria as part of their risk management strategy.33

Moreso, the CBN’s Guidelines aimed at regulating the
International Money Transfer Operators (IMTO), making sure that
only authorized bodies participate in remittance is quite
commendable.34 This provision
ensures that remittance from diaspora is handled by only legally
authorised persons, thereby reducing the insecurity associated with
remittance from diaspora. CBN provision for the approved IMTOs is
good but not the best way of resolving illegal money transfer.
Apparently, only 36 IMTOs are registered,35 raising the question whether the
limited number will not further stifle remittances?36

Remittance and Investment Transactions Structuring:
Optimality Considerations

Nigerians in diaspora can structure their direct investment
transactions for optimal tax impact.37 One way is to look at sectors that
enjoys tax incentives such as tax holidays (pioneer status) or
other preferential tax treatment such as accelerated capital
allowances.38 Previously,
dividends by pioneer status companies were also tax free during the
tax holiday period but the Finance Act
2019
has removed that benefit.39 On the flip side,
CITA’s excess dividends tax (EDT)
provisions have now been made more investor-friendly, so the
disadvantageous tax treatment of investment holding companies will
no longer be the case.40 The
FA 2019 amendments in muting the
harshness of the erstwhile EDT regime, apparently aims at improving
Nigeria’s investment attractiveness.

Nonetheless, the tax free status of such companies means there
would be more distributable profits during the tax free period,
thereby enhancing diasporans returns on investment. Another
preferential tax status example is Nigerian companies that focuses
on exporting goods from Nigeria provided that proceeds of such
export are repatriated to Nigeria and are used exclusively for the
purchase of raw materials, plant, equipment and spare parts.41

Modes of Diaspora Direct Investment Remittances

Diaspora remittance can be for equity or loan investment and
also either in cash or kind. The latter (in kind or non-cash), can
also be in varied forms. This is in consonance with Nigeria’s
liberalised investment environment and forex regime which permits
inflow and outflow of foreign investment, subject to documentation
requirements prescribed by, or pursuant to, the
FEMMPA and the Nigerian
Investment Promotion Commission Act

(NIPCA).42 All investors (irrespective of
nationality), can invest in all sectors of the economy except the
sectors on “the negative list” in the
NIPCA.

Equity Inflow: Cash

Nigerians in diaspora can have equity contribution vide inflow
of foreign currency in cash to the target company. This will
require obtaining electronic certificate of capital importation
(eCCI), evidencing capital inflow into Nigeria.43 Notably, the application for eCCI,
would be done on the foreign investor’s behalf by the Nigerian
bank that received the inflow, through the eCCI platform, which is
run by various banks and overseen by the Financial Market Dealers
Association (FMDA). The application is completed within twenty-four
(24) hours from when the inflow is received.44 e-CCI is a documentation
requirement for the repatriation of dividends or capital upon
divestment. It is required that capital covered by e-CCI will be
converted into Naira for purposes of the investee company’s
business.45

Non-Cash Equity Contribution

Nigerians in diaspora can purchase and import equipment in
consideration for equity (shares) in the target company; same would
qualify for issuance of e-CCI.46
Also, their technical know-how could be valued as a consideration
in lieu of cash, which can serve as a basis for sweat equity.47 It would be apposite to have well
defined agreements on scope of services and the related
compensation (milestone basis and quantum especially for phased
vesting of equity), in this regard to obviate future disputes.

To the extent that diasporans provide any consultancy, technical
or management services directly and not through their non-resident
corporate vehicle to the investee/beneficiary company, there would
be no need to register the service agreement with the National
Office for Technology Acquisition and Promotion (NOTAP), pursuant
to the NOTAP Act.48 That is moreso that there would be
no offshore remittance of the service fees, as same would be the
in-kind consideration for shares to be vested in the diasporan and
credited as fully paid in line with the relevant agreement.
Sometimes in addition to his investment, the diasporan may also
become a director in order to help provide oversight for the
business, especially where his knowledge and experience will make a
significant difference. This may implicate commuting to Nigeria for
meetings.

Foreign Loans

Nigerian diasporans investment by way of debt will qualify as
foreign loans which could enjoy up to 70% withholding tax (WHT)
exemptions on the interest income, depending on the tenor. Such
loan transactions must meet requisite documentation requirements
for offshore repatriation of interest and principal. In order to
discourage thin capitalisation, the Finance Act
2019
has now introduced “excess interest
thresholds”
restricting quantum/terms of related party
foreign loans.

Legal Regulatory Advisory Aspects: Transaction
Dynamics

It goes without saying that advisory services leveraging indepth
knowledge of Nigerian legal regulatory landscape would be required.
Transaction counsel will need to be briefed and thereafter can work
with the client/other advisers as necessary to draw an outline
transaction roadmap which can then be shared with the proposed
counterparties. Part of the preliminary documentation would be
signing of non-disclosure (and non-circumvention) agreement, term
sheet, etc.

Due diligence (DD) would also be conducted because the crying
rule is caveat emptor (buyer beware). A bespoke DD
programme specifying coverage/scope, information and document
requirements, timelines and responsible persons, etc will be drawn
up and of course outcomes will impact valuation of the business or
stake, and transaction negotiations.49 DD (covering legal regulatory,
financial and technical aspects of the business) is not only
important to enable informed decisions, a significant focus is also
on the reputation and integrity of the potential co-investors that
the diasporan is getting into the same boat with. If questions
about their ethics cannot be answered in the positive, then such is
a red flag that ordinarily should impel the diasporan to call of
further activities in proceeding with the proposed investment.

Part of the deliverables from professional advisory support
would be fit for purpose transaction documents such as subscription
agreement, shareholders/joint venture agreement (SHA/JVA), loan
agreement, technical/consulting services agreement, (employee)
equity ownership scheme plan, etc. It is foolhardy for Nigerians in
diaspora to enter into business relationships even with families
and friends without documentation, but based only on
‘trust’. Experience has shown that if there are no
control/governance mechanisms regulating the relationship, such
would more often than not be abused, especially as the diasporan
may not always be available to monitor the business.

Diaspora Nigerian as Foreign
Investor

Sometimes especially for diasporans with dual citizenships, it
may be better to invest in Nigeria in the capacity of a foreign
investor whether directly or through an offshore vehicle –
and obtaining relevant documentation, particularly the
e-CCI/e-CLCI. One reason could be in order to access investment
protection benefits of applicable Bilateral Investment Treaty (BIT)
if his adopted country or residence of his investment vehicle has a
BIT with Nigeria.

This will be in addition to the investment protection guarantees
in the NIPCA50 and
FEMMPA,51 and could come in handy in case of
investment disputes with Nigerian government. Such additional cover
cannot be overemphasized, given the FG’s poor track record with
regard for the rule of law, and the generally slow pace of the
otherwise robust Nigerian judicial system that are sources of
concern to foreign investors.

If a diaspora Nigerian were to invest in Nigerian entities as a
Nigerian, he would suffer WHT on dividends at the standard rate of
10%, whereas if he were to be regarded as a foreign investor, he
could enjoy the lower 7.5% rate for treaty residents if there is an
applicable double taxation treaty (DTT) with Nigeria.52 However, whilst enjoying the lower
Nigerian WHT rate, he may still need to pay tax on the dividends
received from Nigeria (although he would get credit for the
Nigerian WHT).53

Would he have been better placed if he invested as a Nigerian
because dividends is franked investment income that is not subject
to any further tax in Nigeria apart from the WHT deduction? This
question may turn on how the other country treats returns on
offshore investment (in Nigeria) that is not repatriated to the
resident country of the diasporan or whether it is required to. As
a general rule, a diasporan choosing to invest as a foreigner
should presumably have sufficient connection to his resident
country as not be accused of treaty shopping.54

The Nigerian diasporan may actually be able to play beautiful
bride: he can undertake a comparative analysis of pros and cons
of investing as a Nigerian or foreigner
. For example in the
Oil and Gas and Cabotage sectors, it may be better to invest as
a Nigerian for preferential positioning on Nigerian content
rankings
.55

Increasing Diaspora Remittances and Optimising Impact on
the Economy

The FG could step in by prohibiting exclusive contracts between
banks and individual Money Transfer Operators (MTOs), licensing
bureaux de change to conduct money transfers, and engaging the
telecommunications sector in the industry.56 Also, the capacity of the postal
service to conduct remittance business need to be enhanced by the
FG by leveraging its vast number of over 5,000 post offices across
the country to further deepen financial inclusion drive. For
instance, the Nigerian Postal Service (NIPOST) introduced an
Electronic Money Order (eMO) product that enables customers in both
rural and urban communities initiate money order electronically.57 NIPOST further partnered with
Eurogiro, to broaden its postal financial service operations
globally.58

Given the benefits of diaspora remittance to the Nigerian
economy, it is expedient that the Government make available
policies that will encourage diaspora remittance. Many of diaspora
concerns about investments in Nigeria impels the FG needs to work
harder at entrenching governance improvements in the country. For
example, the public service needs to work with transactional
mindset to ensure bureaucracy does not continue to be a log in the
wheel of progress: diasporans will often compare efficiency of
Nigerian public service with those of their resident country.
Commitment to facilitating an enabling environment for business
must be seen in actions to significantly reduce public sector
corruption and waste,59 be
subservient to the rule of law, avoiding regulatory policy flip
flops and continuing pro-business reforms. The cumulative effect of
these will improve Nigeria’s positive perception index in the
committee of nations, and help to cast an optimistic outlook that
all (including diasporans) can identify with.60

Diaspora Bonds

Diaspora bonds, an avenue created by the Government for
non-resident citizens to invest in their home country, is a safe
means of investing. The bond proceeds could be used to finance
projects that interest diasporans, such as: public services and
infrastructure projects that would benefit their families or
communities back home.61 Some
diaspora bonds could be raised for strategic infrastructural
projects; the potential socio-economic impact and the underlying
investment incentives should enhance the attractiveness and success
of such bonds.62

In June 2017, the FG issued its debut diaspora bond at 5.625%;
the five year bond raised US$300 million, representing 130%
subscription.63 Managed by the
Debt Management Office (DMO), and structured as a retail instrument
to appeal to a wide range of investors but targeted principally at
Nigerians abroad – to provide them with the opportunity to
contribute to national development – the bond was “offered
through private banks and wealth managers, rather than
institutional investors, which normally deal in large volume
transactions.”
64

With the successful first outing, we daresay that Nigeria could
do more in that space. Countries like Israel and India, the
pioneers of Diaspora Bonds leveraged them over time to raise over
US$$35 billion and US$$11 billion respectively.65 It is thus curious that given the
success of its debut offering, the FG has not gone to the market
with another diaspora bond.

Reform Suggestions and Conclusion

The WB and other experts have projected that Nigerian diaspora
remittances will be on the upward swing. Nigerians abroad could
even send more money home than projected if all the touch points of
diaspora and investors’ concerns are addressed. It was good
that the recent call for diaspora taxation was not heeded in the
recently enacted Finance Act 2019:
overturning the friendly tax regime for diaspora remittances would
have meant Nigeria shooting herself in the foot.66

Efforts should be intensified by private sector investment
institutions to amongst others, design products through which
diaspora investment funds could be channelled into Nigeria, to
provide additional tracks for investment flows.67

Hopefully, the ease of doing business initiatives will
vigorously continue, via legislative, policy and regulatory reform
improvements.68 Diasporans also
have an array of skilled Nigerian professional advisers (lawyers,
accountants, investment bankers, financial advisers, asset
managers, etc) at their disposal, many of which are astute at
helping foreign investors actualise their Nigerian entry, operating
and exit strategies.69 Nigeria can
borrow successful diaspora policies of leading recipient countries
like India, Mexico and Philippines. The diaspora bank for instance
can be established in Nigeria.70

Enshrining diaspora voting rights and implementing proposals
such as “ongoing plans to bring in representatives of
Nigeria’s diaspora as honorary members of the Nigeria Economic
Advisory Council”
would go a long way in further raising
the attractiveness of diaspora institutional economic interventions
in Nigeria.71 The FG can
collaborate with other countries where larger population of
Nigerians in diaspora exists to establish a remittance country
partnership or a remittance treaty to encourage formal remittance
and reduce the cost of remittance transfer just the way double
taxation treaties operate globally. For example, the US and
Mexico’s “Partnership for Prosperity”,
provided an action plan of lowering the cost of remittance
transfers originated in the US to Mexico. Same applies in Southeast
Asia, where Japan concluded respective bilateral agreements in 2004
with the Philippines and Malaysia to facilitate workers’
remittance and improved access to financial institutions.72

The wisdom of Africa’s richest man, Aliko Dangote is apt:
Nigerians (Africans) have to take the lead in investing in the
country/continent. In a sense that is a more credible campaign for
foreign investment than the moral burden of mere platitudes.
Diasporans’ wealth of knowledge in addition to their
remittances can help to reinvigorate the economy and boost
Nigeria’s competitiveness.73
The concerted efforts of Nigerian citizens (including diasporans)
and credible, investment-friendly government policies would enhance
and accelerate Nigeria’s prospects of actualising her
potentials.74

Footnotes

1 Some eye-catching statements in
an Afrinvest presentation (referenced in further detail below), is
to the effect that “Nigeria is NOT an oil producing
country! Nigeria is a human capital producing country because
diaspora flows far exceed gross oil revenue
receipts!”

2 See for example,
Federal Republic of Nigeria Draft
National Policy on Diaspora Matters’
,
November 2016
, p. ii:
http://diaspora.gov.ng/final-draft-national-policy-on-diaspora-matters.pdf
(accessed 25.05.2019); Dalberg, ‘Event Report:
Nigeria Diaspora Study Dissemination Dialogue’
,
(Dalberg Report)November 2018, p.
4
: file:///C:/Users/USER/
Downloads/181218-Nigeria-Diaspora-Study-Final%20(1).pdf (accessed
01.02.2019); Victor Asije, ’15 Million Nigerians in
Diaspora – Dabiri-Erewa’
, NAN, 2017:
http://www.nan.ng /news/15-million-nigerians-diaspora-dabiri-erewa/
(accessed 04.05.2019). According to Afrinvest (citing National
Commission for Refugees, Migrants and Internally Displaced Persons
(NCFRMI)), “about 17 million Nigerians live in various
countries of the world.”
See Ike Chioke,
‘…Envisioning New Paradigms for Investment in Nigeria
n’Ala Igbo’:
https://www.afrinvest.com/wp-content/uploads/2019/04/Envisioning-New-Paradigms-for-Investment-nAla-Igbo_FINAL.pdf
(accessed 01.02.2020).

3 ‘Senate
Confirms Abike Dabiri-Erewa as Chairman/CEO of Nigerian Diaspora
Commission’
, The Punch,
09.05.2019
: https://punchng.com/senate-confirms-abike-dabiri-erewa-as-chairman-ceo-of-nigerian-diaspora-commission/
(accessed 25.05.2019).The establishment of the NDC vide the
NDC Act 2017, was a build-up of past
administrations’ efforts. Femi Awoniyi,
‘Nigeria: Dabiri-Erewa Appointed First Head of
National Diaspora Commission’
, The African
Courier, 06.11.2018
: https://www.theafricancourier.de/africa/dabiri-erewa-appointed-first-head-of-national-diaspora-commission/(accessed
17.10.2019). In 2000, under President Obasanjo, Nigeria In Diaspora
Organization (NIDO) was set up to serve as an umbrella organization
of all Nigerians abroad and a vehicle through which they could be
mobilized to participate in national development process. In 2016,
the Buhari administration created the SSAFAD office to directly
coordinate Diaspora matters/ facilitate their involvement/
engagement See Federal Republic
of Nigeria Draft National Policy on Diaspora
Matters’
, (November 2016),
pp.11-12.

4 It was recently reported that
the Nigerian Diaspora Policy has been
finalised and is now awaiting approval by the Federal Executive
Council. See ‘Nigeria Diaspora Policy Underway
– Dabiri-Erewa’
, The Guardian,
31.12.2019
: https://guardian.ng/news/nigeria-diaspora-policy-underway-dabiri-erewa/
(accessed 01.02.2020). According to a news report, pursuant to a
motion, “…the House mandated ‘the Committees on
Diaspora, Banking and Currency, National Planning and Economic
Development to interface with the Nigerians in the Diaspora
Commission, the Central Bank of Nigeria, Money Transfer Operators
and other stakeholders to investigate the actual amount of
remittances in the last three years and report back within four
weeks for further legislative action.'”
See Adedayo
Akinwale, ‘House Investigates Discrepancies in
Diaspora Remittances’
, ThisDay,
27.11.2019:
https://www.thisdaylive.com/index.php/2019/11/27/house-investigates-discrepancies-in-diaspora-remittances/
(accessed 01.02.2020).

6 See Yomi Kazeem,
‘The Trump Administration Just Made Its First Move
in a Clampdown on US Visas for Nigerians’
,
Quartz,14.05.2019:
https://qz.com/africa/1618935/us-cancels-dropbox-visa-interview-waiver-in-nigeria/
(accessed 21.10.2019); See also data from the US Department of
State’s Bureau of Consular Affairs:
https://travel.state.gov/content/dam/visas/Statistics/Non-Immigrant-Statistics/NIVDetailTables/FY18NIV
DetailTable.pdf (accessed 21.10.2019). See Dayo Oketola et
al,
‘Economic Hardship: Nigerians Seek Greener
Pastures Abroad’
, The Punch, 04.06.2016:
https://punchng.
com/economic-hardship-nigerians-seek-greener-pastures-abroad/
(accessed 09.09.2019).

10 See WB, ‘Data
Release: Remittances to Low- and Middle-Income Countries on Track
to Reach $551 Billion in 2019 and $597 Billion by
2021’,

16.10.2019: https://blogs.worldbank.org/peoplemove/data-release-remittances-low-and-middle-income-countries-track-reach-551-billion-2019
(accessed 01.02.2020). According to the WB: “Remittance
flows to low- and middle-income countries (LMICs) are expected to
reach $551 billion in 2019, up by 4.7 percent compared to 2018 …
Remittances have exceeded official aid – by a factor of three
– since the mid-1990s. This year, they are on track to
overtake foreign direct investment (FDI) flows to
LMICs…”

14 Tope Alake,
New Wave of Middle-Class
Emigration Deepens Nigeria’s Skill Shortage’,

Bloomberg, 30.05.2019:https://www.bloomberg.com/news/articles/2019-05-30/new-wave-of-middle-class-flight-deepens
-nigeria-s-skill-shortage
(accessed 31.05.2019). According to
the article, “An anemic economy that contracted for the
first time in two decades in 2016, poor health facilities and
schools, a worsening insecurity marked by a decade-old Islamist
insurgency in the northeast, kidnapping and herdsmen attacks in
other parts of the country are driving the exodus. It comes at a
time when Nigeria has become the nation with the largest number of
poor people.” “Canada’s liberal immigration policy is
a strong pull for Nigeria’s top talent that faces rising living
costs and stagnant incomes. Inflation has been at double digits
since 2015, while the unemployment rate has hit its highest level
since 2010. Applications for permanent residency in Canada have
risen threefold since 2015, data from Immigration, Refugees and
Citizenship Canada show, while those for temporary residency has
almost doubled over the same period.” “The number of
Nigerians suspected overstaying in the U.S. with visitor visas has
more than quadrupled from 2015 to last year, according to data from
the U.S. department of Homeland Security. The overstay rate of
Nigerian students studying in the U.S soared to 22% last year from
4% in 2015. Of about 155 countries that have citizens overstaying
in the U.S. as non-immigrants with business and pleasure visas,
Nigeria ranks among the top 10…” “Almost 30,000
Nigerians admitted with business and tourist visas are overstaying
in the U.S as of 2018.” “The health-care industry is one
of the most affected by the exit of professionals. About 9 out of
10 medical doctors in practice are exploring work opportunities
abroad, a 2017 survey by polling company NOI Polls shows. In
Britain there are currently 6,312 medical doctors of Nigerian
origin, according to data on the U.K. General Medical Council
website, a 44% increase on 2015 figures. That’s worsened health
care in a country that has one doctor to serve 5,000 people,
according to the Nigeria Medical
Association.”

15According to the Bloomberg
report: “‘Those who emigrate can time-travel’,
said Charles Robertson, Chief Economist at Renaissance Capital.
‘They jump forward decades of economic development to work in
countries which are usually more stable, wealthier, with better
education for their children and better health care.'”
“‘All professional firms and major corporations in Nigeria
are affected by the brain drain,’ said Andrew S. Nevin,
advisory partner and chief economist at PwC Nigeria. ‘The
Nigerian government needs to create an economic and social
environment sufficiently attractive to keep our educated young
people.'”

16 See Chijioke Nelson,
‘Emerging Trends and Innovations in Diaspora
Remittance’
, The Guardian, 07.05.2019:
https://guardian.ng/technology/emerging-trends-innovations-in-diaspora-remittances/
(accessed 30.10. 2019). Illustrative of regulation of formal
channels is the Central Bank of Nigeria (CBN)’s
2015 Guidelines on International Mobile Money
Remittance Service
(CBN 2015
Guidelines
) provided for the operation of and
issuance of licences for International Mobile Money Remittances
Services (IMMRS) which allows remittances via mobile
applications.

19 Cap. P8, Laws of
the Federation of Nigeria (LFN), 2004. Section 19(1)
PITA
and Paragraph 6 Third Schedule
PITA
lists as tax exempt: interest to non-residents
on government loans and bonds. Whilst section 75
PITA
provides that investment proceeds derived from
outside Nigeria and brought into the country through approved
channels are also tax exempt.

20 Nigerian companies are
however liable to Nigerian tax on their global income, subject to
tax credits they will enjoy in respect of taxes paid in countries
with which Nigeria has DTTs or the tax exempt status of offshore
investment income if brought into Nigeria through approved
channels, pursuant to section 23(1)(k)Companies Income
Tax Act, Cap. C21, LFN 2004 (CITA).
For some related
discussion, see Chuks Okoriekwe, ‘Options: Plugging
Nigeria’s Perennial Revenue Gap through Diaspora
Taxation’
, LeLaw Thought Leadership Insights,
August 2019
: http://lelawlegal.com/2019/12/10/options-plugging-nigerias-perennial-revenue-gap-through-diaspora-taxation/
(accessed 05.02.2020).

21 See Para.
6(1)(a)-(c), Third Schedule PITA.

22 Para. 6(2) Third
Schedule, PITA.

23 The other issue is that
formal remittances is more helpful for statistical purposes, and
thereby provide helpful input for policymakers in monitoring
remittance flows and measuring their impact on the economy in
addition to other policy actions. At best, informal remittances can
only be subject of guesstimates.

24 Section 12
Foreign Exchange (Monitoring and Miscellaneous Provisions) Act,
Cap. F34, LFN 2004
(FEMMPA)
requires declaration of forex in excess of US$5,000 or its
equivalent at the port of entry into Nigeria, for statistical
purposes only. The CBN has since 2018 (per its Revised
Forex Manual
), increased the threshold for
non-declaration to US$10,000; only amounts in excess thereof must
be declared. Section 2
MLA
imposes a duty to report international transfer
of funds or securities of a sum greater than US$10,000 or its
equivalent shall be reported to the CBN and indicating the nature
and amount of the transfer, and the names and addresses of the
sender and receiver of the funds or securities”
; In case
of breach, section 15(2)(b)(i) MLA
imposes a fine of between N250,000 and N1 million or a term of
imprisonment between 15 and 25 years or both such fine and
imprisonment upon conviction. Section 21 Economic and
Financial Crimes Commission (Establishment) Act 2004
(EFCCA)
provides for forfeiture of property of a
person convicted of an offence under the
EFCCA.

25 Incentivize the inflow of FDI
(increase from US$3.1 billion to around US$10 billion by 2020),
portfolio investments and remittances. The aim of
Strategy No.9 ERGP is to reduce the
external balance gap. This Strategy is led by the CBN.

26 The
NDCA vests the Commission with powers to
formulate policies as it may from time to time determine:
section 8(c). Also,
NDCA’s Explanatory
Memorandum
describes it as: “An Act to establish the
Nigerians in Diaspora Commission, provide for the engagement of
Nigerians in diaspora in the policies, projects and participation
in the development of Nigeria and for the purpose of utilising the
human capital and material resources of Nigerians in diaspora
towards the overall socio-economic, cultural and political
development of Nigeria; and for related
matters.”

27Alix Murphy,
‘Three Steps to Reduce the Cost of Remittances to
Africa’
, TechCabal, 15.08.2016: https://techcabal.com/2016/08/15/three-steps-to-reduce-the-cost-of-remittances-to-africa/
(accessed 15.08.2016). The World Bank Migration and
Development Brief 29
noted that global average cost
of sending remittances has remained nearly stagnant, standing at
7.1% Q1 2018, more than twice the Sustainable Development Goal
target of 3%. See WB Group and KNOMAD, ‘Migration
and Development Brief 29’,
29.04.2018,
p.v:
https://www.knomad.
org/sites/default/files/2018-04/Migration%20and%20Development%20
Brief%2029.pdf (accessed 27.09.2019).

28
(2013)LPELR-20833(CA).

29 See per Akomolafe-Wilson
JCA
at pp. 34-37: “The
wordings of the law are replete of indices of fraud. All these show
that there is no escape route from tying count 15 to the issue of
fraud. Without any equivocation whatsoever, it is clear that fraud
is the most essential ingredient of the offence in the charge in
count 15. The prosecution, being mindful of this necessary
requirement of the law rightly inserted in Count 15, the phrase
‘with intent to conceal the money you fraudulently collected
from Ambassador Sam Edem…’ “
; Similarly, the
Commercial Banks restricts certain bank transaction which
complements Para 14.0 Guidelines (Anti-Money Laundering
and Countering the Financing of Terrorism)

provisions: “The IMMRS providers shall have measures in
place to prevent money laundering and terrorist financing. The
mobile money IT system shall have inbuilt mechanisms to identify
suspicious transactions. The following measures shall be in place:
(a) Adhere to international Know Your Customer (KYC) standards at
account opening by carrying out Customer Due Diligence (CDD). The
entity conducting customer verification should require at least one
of the following documents to verify the identity if the customer:
a valid international passport, National Identity Card, permanent
voter’s card, driver’s license. (b) Allowable maximum limit
of the outbound mobile money remittance per week shall be US$100 or
its equivalent, subject to periodic review by the CBN (c)
Suspicious transactions should be reported in line with the AML/CFT
Act.”

30 The Nigerian Diaspora Housing
Programme (NIDHOP), was promoted by the Federal Housing Authority
in March 2017 aimed at meeting the housing needs of Nigerians in
diaspora, as well reduce the loss of diaspora funds to fraudsters,
who often times are relations of the victims, in the name of
building houses for them in Nigeria. See Victor Gbonegun,
‘Delay in Land Acquisition Hinders FG’s
Diaspora City Project Take Off in States’
,
The Guardian, 19.08.2019: https://guardian.ng/property/delay-in-land-acquisition-hinders-fgs-diaspora-city-project-take-off-in-states/
(accessed 09.02.2020).

31 See WB Group and KNOMAD,
‘Migration and Development Brief
29’,
29.04.2018, Ibid, p.v.
https://www.knomad.
org/sites/default/files/2018-04/Migration%20and%20Development%20
Brief%2029.pdf (accessed 27.09.2019).

32 The FSB presented two reports
at the March 2018 G-20 Finance Ministers and Central Bank Governors
meeting (FSB 2018a, 2018b), and outlined the following points – (i)
better dialogue between stakeholders and better practices in the
remittance sector; (ii) improved implementation of international
standards and (iii) use of innovation to facilitate remittance
firms’ access to banking services; and (iv) technical
assistance related to remittances.

34 See for example Paragraph
2 CBN 2014 Guidelines which provides that
No person or institution shall operate International
Money Transfer Services unless such person/institution is licensed
by the CBN”
.

36 The authoritative
Dalberg Report admitted that its
“study did not focus on the channels of remittance – cash,
digital transfers, cryptocurrency. Perhaps digging into the
channels could help address concerns about the reliability of
remittance data. It would be nice to see recent data on remittances
… in order to validate if there is a correlation to the
macroeconomic performance of Nigeria.”
It also stated
that “on the potential negative impact of remittances,
this is where the Central Bank plays a role in ensuring that
capital inflows from the diaspora do not disrupt macroeconomic and
currency stability.”
Ibid, at p. 7. “The
focus of the study was primarily on two models of diaspora
engagement: remittances to Nigeria and direct investments in
Nigeria (whilst also looking at the diaspora’s promotion of
investment in Nigeria).”
See Dalberg
Report
, p.5.

37 Portfolio investments through
the capital market does not require major structuring
considerations and is therefore not the focus of this aspect of our
discussions.

40
CITA’s erstwhile EDT provisions
(section 19) require that if a company
had nil or lower taxable profits than its declared dividends, the
dividends would be treated as taxable profits and taxed
accordingly. The new exceptions to EDT include if the dividends
are paid out of retained earnings
that had been previously
taxed under relevant legislation (as income or capital gains tax);
paid out of tax exempt income or if they are paid out
of profits or income regarded as franked investment income

(that is, not subject to further tax). For detailed historic
discussion, see the following ‘Taxspectives by Afolabi
Elebiju’
articles: ‘Oando Plc v FIRS:
Excess Dividends Tax Revisited’
, ThisDay
Lawyer
, 07.10.2014, p. 12; ‘Excess
Dividends Tax: The Unfinished Business’
,
ThisDay Lawyer, 26.11.2013, p. 7; and
‘Rethinking Nigeria’s Excess Dividends
Tax’
, ThisDay Lawyer, 20.11.2011, p.
vii
. All the articles are also available at LeLaw’s
Thought Leadership page: www.lelawlegal.com.

One positive outcome of the EDT amendments is that the
risk posed by section 21 CITA (on deemed
dividends distribution as an anti-avoidance measure) is now
drastically reduced.

41 Section 23(1)(q)
CITA.

43 The eCCI was introduced by
the CBN vide its Circular dated September 7 2017 with Ref. No.
TED/FEM/FPC/GEN/01/012 titled ‘Implementation of Electronic
Certificate of Capital Importation (eCCI)’
. The eCCI will
alleviate the challenges with handling physical CCIs issued in
respect of all capital inflows either in form of cash or
machinery/equipment. See CBN, https://www.cbn.gov.ng/out/2017/ccd/re%20implementation%20of%20ecci.pdf
(accessed 17.11.2019); The documentation requirements for e-CCI
include: (a) letter from the investor requesting for CCI; (b) Board
resolution from the Nigerian company (registered local beneficiary
company) authorizing the equity investment; (c) A copy of the
Nigerian company’s certificate of incorporation; (d) Tested
SWIFT telex copy stating the amount and purpose of inflow; (e)Name
and address of foreign investor; (f) Registration number and date
of registration of investors; (g) Investor’s nature of
business; (h) Beneficiary’s sector of operation. Upon
successful application, a password will be provided to the foreign
investor and this password can be entered on the e-CCI platform to
view and print the eCCI.

46 Documents required to issue
e-CCI for the importation of machine and equipment as an equity
investment are similar to cash for equity but for these additional
ones: (a) Selection of Beneficiary’s operation; (b) Risk
assessment report/combine certificate of origin and value for
destination inspection; (c) Certified copy of the bill of lading
(original to be sighted); (d)Certified copy of the bill of
entry/single goods declaration form (original to be sighted); (e)
The original import duty payment receipt bearing a single goods
declaration (SGD) Form Number; and (f) Copy of Form M 11. Goods
exit note.

47 Section 137(1)
CAMA
provides that: “Where a company agrees
payments for its shares otherwise than wholly in cash, it shall
appoint an independent valuer who shall determine the value of the
consideration other than cash and prepare and submit to the company
a report on the value of the consideration.”

52 Nigeria has a double taxation
treaty (DTT) with the UK and 13 countries: Nigeria has DTTs with
the UK, The Netherlands, Canada, South Africa, China, Philippines,
Pakistan, Romania, Belgium, France, Czech, Slovakia, Singapore, and
Italy. All the DTTs are comprehensive except the treaty with Italy
which covers Air and Shipping agreement only. See FIRS,
‘Tax Treaties’: https://www.firs.gov.ng/TaxResources/TaxTreatiesNew(accessed
09.02.2020); See also FIRS Circular No.2019/03 (Circular),
‘Information Circular on the Claim of Tax Treaties
Benefits In Nigeria’, 04.12.2019:
https://assets.kpmg/content/dam/kpmg/ng/pdf/tax/circular-on-the-claim-of-tax-treaties-benefits-in-nigeria.pdf
(accessed 09.02.2020); Specifically para.3.3 of the
Circular
states that “A taxpayer, resident
or non-resident may be denied treaty benefits if, based on facts or
circumstances, it is discovered that its residency of one of the
treaty countries was principally for the purpose of accessing that
treaty benefit (treaty shopping) or if it is discovered after
careful review of the case that one of the principal purposes of
the arrangement of a transaction or business is to take advantage
of the treaty or abuse its provisions (Principal Purpose Test
‘PPT’)”
; Also note that according to the
Circular, residents of countries like South Africa and Mauritius
whose DTTs with Nigeria are not yet ratified will not be able to
claim treaty benefits until respective ratification process
(vide local legislation) is complete..

53Other DTT benefits include
prevention of double taxation; combating tax evasion and double
non-taxation; assignment of primary taxing right to one country;
and creation of reciprocal assistance in administering and
enforcing tax laws between countries. See Alexander Tripelkov
et al, ‘United Nations Handbook on
Selected Issues in Administration of Double Taxation Treaties in
Developing Countries’
, June 2013:
un.org/esa/ffd/wp-content/uploads/2014/08/UN_Handbook_DTT_Admin.pdf
(accessed 11.02.2020).

54 The incidence of dual
residency may arise if a Nigerian in diaspora resides in a country
where no tax treaty exist between the country and Nigeria. In this
circumstance, such an expatriate will be taxed in Nigeria and the
country where he is a citizen. In Cadwalader v.
Cooper
, CE 1904, STC
101
it was held that a taxpayer could be held to
reside simultaneously in more than one country if he maintained an
establishment like abode in each. Thus, proper tax planning is
required to ensure that the good intentions of Nigerians in
diaspora does not expose them to more tax exposures.

55 Section 3(1)
Nigerian Oil and Gas Industry Content Development Act No.2
2010
gives first consideration to Nigerian operators,
Nigerian independent operators shall be given first
consideration in the award of oil blocks, oil field licences, oil
lifting licences and in all projects for which contracts is to be
awarded in the Nigerian oil and gas industry subject to the
fulfilment of such conditions as may be specified by the
Minister.”

59 According to Transparency
InternationaI’s Corruption Perception Index (TICPI) 2019,
Nigeria fell from its prior ranking from 144 in 2018 to 146 out of
180 countries. The nation scored 26 out of 100 points, falling by
one point compared to 2018.See TICPI, https://www.transparency.org/country/NGA
(accessed 10.02.2020); This reinforces the fact that there is
little or no improvement in the fight against corruption in
Nigeria. Although the FG had come up with several measures such as
the whistle blowing policy, treasury single account etc., yet these
has not translated to improved economy.

60 Comparison can be made with
how positive Nigerian outlook during President Obasanjo’s
second term (2003-2007) witnessed the massive return of skilled
Nigerian diasporans (repatriates). Such repatriates for example
helped to fill significant skill gaps at the onset of Nigeria’s
telecommunications (GSM) revolution and helped make it the runaway
success that it became.

61 See also feedback from the
Dalberg Report (at p.7):
“The big issue is that we have about 80% of our population
living on less than USD 2 a day. What will be interesting is to
identify areas that link closely to diaspora personas that care
about social good and channelling their investments to specific
opportunities that help to address poverty. The second important
factor is to see how to expand investments from the diaspora to
geographical regions that are doing very badly in the poverty
index. Interestingly, the study indicates a marked interest by the
diaspora to invest in these regions in the
future.”

63 Soni Daniel,
‘Nigeria’s Diaspora Bond Oversubscribed By
130%’
, Vanguard, 30.06.2017:
https://www.vanguardngr.com/2017/06/nigerias-diaspora-bond-oversubscribed-130/
(accessed 27.05.2019); See also, Yomi Kazeem,
‘Nigeria’s First Ever Diaspora Bond Has Raised
$300 Million’
, Quartz Africa,
26.06.2017
: https://qz.com/africa/1014533/nigeria-has-raised-300-million-from-its-first-ever-diaspora-bond/
(accessed 27.05.2019). In our view, if corruption and transparency
issues are well addressed, Diaspora Bonds could be good because
they are likely to have less onerous conditions (compared to say
Chinese loans that requires utilising Chinese contractors, labour
and equipment), whilst investors have a good feeling – that
they are contributing to Nigeria’s growth and development (i.e.
as a form of giving back), through their investment. Whilst
obviating being tied to apron strings of lender
countries/institutions, Diaspora funds can be an avenue to regain
national pride.

64 See Obinna Chima, ‘Debt
Issue Subscribed by 130%, says Nwankwo’, ThisDay, 20.06.2017:
https://www.thisdaylive.com/index.php/2017/06/20/in-a-first-diaspora-bond-fg-successfully-raises-300m/
(accessed 01.02.2020). According to the news report, quoting then
Director-General of the DMO and Minister of Finance respectively:
“…there was considerable interest from investors from
all over the world, with the issue attracting initial orders of
about 190 per cent of the offered amount. Final subscriptions were
about 130 per cent of offer at the final price for the transaction.
The diaspora bond has opened a new source of financing for the FGN
for funding projects for the development of the country. This new
window further enhances funding liquidity and flexibility of the
Nigerian economy, which are necessary characteristics as the
country gathers momentum towards the attainment of advanced economy
status, Nigeria is the first African country to issue a bond
targeted at retail investors in the United States, a market highly
regulated by the United States Securities and Exchange Commission
(U.S. SEC). … The issuance of a bond registered by the U.S. SEC
provides an opportunity to access a wide range of investors,
Nwankwo explained.” “To have received the approval of the
U.S. SEC was indicative that the highest level of transparency and
accountability in the economic process has been attained. She
explained that the bond should positively impact the country’s
credit rating, transparency rating and financial market development
index rating. The Diaspora Bond is the first bond issued by an
African sovereign registered with both the U.S. SEC and the United
Kingdom Listing Authority (UKLA) and targeted at retail
investors.”

65See generally, Suhas Ketkar
and Dilip Ratha, ‘Diaspora Bonds for
Education’
, The World Bank:
http://web.worldbank.org/archive/website01363/WEB/IMAGES/DIASPORA.PDF
(accessed 27.05.2019). “Israel has issued diaspora bonds
by the Development Corporation for Israel (DCI) since 1951 raising
a total of $32.4 billion as at 2015. The bond was set up to finance
development projects in various industries including energy and
transport. On the other hand, India set up its bond to support
their balance of payments and it has done this three times Indian
Development Bonds in 1991 ($1.6 billion), Resurgent Indian Bonds in
1998 ($4.2 billion) and Indian Millennium Deposits in 2000 ($5.5)
raising a total of $11.3 billion. The bond issued by the DCI was
listed with the Securities and Exchange Commission (SEC) and thus,
it was open to foreign nationals as well as the Diaspora of Israeli
origin. Whereas India’s bonds were issued strictly to the
Diaspora of Indian origin and were not listed in the
SEC.”
See Nairametrics, ‘How Diaspora
Bonds Work and Benefits’
, 09.20.2019: https://nairametrics.com/2019/09/20/how-diaspora-bonds-work/
(accessed 01.02.2020). For another view of India’s success with
diaspora bonds, see ‘Remittances: A Smoothening
Agent’
, Proshare, 17.05.2018: https://www.proshareng.com/news/Forex/Remittances-A-Smoothening-Agent/40057(accessed
27.05.2019).

67 Responding to questions about
what their experience has been in exploring fundraising from the
diaspora, a participant at the Nigeria Diaspora Study
Dissemination Dialogue
(in November 2018) said: “Both
on the private equity and asset management side, CardinalStone has
supported Nigerians in the diaspora in making principal investments
in Nigeria and Ghana. From an institutional perspective, there are
two main challenges: absence of information symmetry and
restrictive investment regulations on offshore markets that prevent
capital providers from Nigeria from soliciting investments from the
diaspora. The biggest barrier to investing on the private equity
side is that the minimum funds investing firms accept often run
into millions of dollars, inhibiting participation from interested
diasporans who lack that scale of capital. One of the ways to
address this is through pooled investment vehicles and clubs that
can vet their members, pull the funds, and then aggregate funds for
private equity investments. Early-stage businesses whose financing
needs are smaller ticket sizes present another great opportunity
for disaporans to invest through angel networks. On the diasporan
end, there’s also the question of lack of understanding of the
varying dynamics of different investment options (i.e., safer
options such as fixed income versus and riskier options like
private equity). Capital providers need to step back and profile
diasporan investors, taking into account their risk appetite in
offering investment products. Nigeria has a robust regulatory
framework; the challenge is with figuring out where to find
information on regulation.”
See Dalberg
Report
, p.9; One of the products that can be
introduced is the diaspora visits, which Ghana successfully
implemented in 2019 thus attracting investment opportunities into
their country. See Natacha Larnaud, ‘This is your
home- come here and make it yours: Ghana encourages African
Americans to visit as part of the ‘Year of Return’
campaign’
, CBS News, 17.01.2020: https://www.cbsnews.com/news/this-is-your-home-come-here-and-make-it-yours-heres-how-ghanas-year-of-return-has-impacted-african-americans/
(accessed 12.02.2020); The Nigeria Diaspora Investment Summit
(NDIS) scheduled to hold on 2-3 November 2020 at the Presidential
Villa, Abuja is strategic in integrating diasporans in national
development. See NDIS, ‘Nigeria Diaspora Investment
Summit 2020’
: https://ndis.gov.ng/ (accessed
12.02.2020).

68 Part of the feedback from the
Dalberg Report (at p.7) was
that: “Investors lack clarity on where to go to for
investment advice and whom to trust to provide quality advice.
…There are different layers to the diaspora’s concerns
regarding corruption. First, people have or know someone who lost
their funds either through an individual scam or fraud in
government. Second, perception is based on corruption stories
reported in the media. Intervention is required both at checking
corruption and addressing the messaging that goes out about
corruption in Nigeria.”
Yet another feedback (at p.7) is:
Regarding the comment on regulation, perhaps there is a
robust framework, but more important is how the regulatory
framework is implemented. One thing that was expressed strongly in
the survey is distrust in the system stemming from past experiences
of diaspora investors with cumbersome litigation processes and
lengthy duration. In addition, there are perception issues about
our legal system that need to be addressed.”

69 See for example, excerpt of
comments attributable to Onyekachi Wambu (Executive Director,
Afford UK
) in the Dalberg Report (at
p.8): “Attempts have been made in the past to set up a
diaspora trust fund but have failed due to concerns among the
diaspora community that the funds would be misappropriated. It is
logical that diasporans are interested in investing in offshore
markets that offer better accountability and transparency. Afford
has deployed three key interventions that could help address these
constraints and encourage investments from the diaspora community:
providing financial, technical, and strategic support to diasporans
investing in small and medium-sized enterprises (SMEs) through the
Afford business club; creating diaspora investment and policy
forums as a platform for sharing pain points with regulators; and
working towards launching a diaspora bond to fund impactful
projects in Africa.”

70 According to Obinali Egele,
Founder, Diasfunds: “A good way to go about attracting
diaspora investments is to create emotional connections with the
African continent to stimulate interest in investing. A key issue
faced in designing investment products is limited information on
what is and is not acceptable by regulation. Given that the
crowdfunding model is new in this part of the world, there is not
yet a framework guiding its operation. Attempts to launch a
crowdfunding platform stalled with the realisation that the
Security and Exchange Commission (SEC) had banned it. Recent
developments including the establishment of an innovation sandbox
give hope that these types of bottlenecks will be addressed soon.
Investment promotion should be led by the private sector, while
government’s role should remain that of creating an enabling
environment.”
See Dalberg
Report,
p.9; The First Bank of Nigeria (FBN)
introduced ‘FirstDiaspora Suite’ a product offered
to diasporans enabling them to have diaspora accounts making their
banking transactions seamless. See FBN, ‘Diaspora
Banking’:

https://www.firstbanknigeria.com/personal-banking/diaspora-banking/
(accessed 12.02.2020); See also Paytech, ‘CBN
Licenses Insterswitch, Flutterwave, Venture Garden, Pagatech,
e-Tranzact, VTN as International Money Transfer Operators’,
04.02.2019:
https://www.financialtechnologyafrica.com/2019/02/
04/cbn-licenses-interswitch-flutterwave-venture-garden-pagatech-e-tranzact-vtn-as-international-money-transfer-operators/

(24.02.2020).

71 See Section
9(b)
NDCA which provides
that as part of the NIDCom’s functions, it shall-
“advise the Federal Government on measures that would
create a conducive environment for the Nigerians in Diaspora to
effectively participate in the economic and social development of
the nation.”
Declaring July 25th as Diaspora
Day by the FG is an important move to endear diasporans to FG’s
extended hands of fellowship and readiness to actively involve them
in national development. See Adelani Adepeba, ‘FG
Declares July 25 National Diaspora Day’
, The
Punch, 24.07
.2018, https://www.pmnewsnigeria.com/2018/02/04/diaspora-nigerians-launch-forum-tackle-nigerias-challenges/
(accessed 05.09.2019); However, the INEC and Senate remark that
Nigeria is not ripe for diaspora electronic voting in 2023 election
is rather unfortunate. See Olalekan Adetayo et al,
‘Nigeria not Ripe for Diaspora, Electronic Voting -
INEC, Senate’
, The Punch Newspaper,
16.02.2020
https://punchng.com/nigeria-not-ripe-for-diaspora-electronic-voting-inec-senate/
(24.02.2020).

72Notably, the Department for
International Development (DFID) initiated Remittance Country
Partnership with select countries including Nigeria, which all
receive large volume of remittance transfers from the UK. See Raul
Hernandez-Coss, ‘The Impact of Remittances:
Observations in Remitting and Receiving
Countries’
, Discussion paper prepared for the
G24 XXIII Technical Group Meeting, Singapore, 13-14.09.2006
:
https://www.g24.org/wp-content/uploads/2016/01/The-Impact-of-Remittances-Observations-in-Remitting.pdf
(accessed 11.02.2020).

73 Cf. findings from
the Dalberg Report (p.5): “The
study revealed that real estate is the most popular category for
both current and future investments. Members of the diaspora also
indicated the potential for a significant increase in investment in
franchises, export-oriented businesses, and social enterprises. The
top three sectors of interest – both now and in the future – are
technology, services, and agriculture.”

74 Of note is the NIDCom’s
survey to elicit information on how to serve diasporans (especially
prospective investors), better and the upcoming 2nd
Nigerian Diaspora Investment Summit in November 2020, whilst
NIDCOM’s website (especially the news page, https://nidcom.gov.ng/nidcom-news/ (accessed
28.02.2020), provides updates of NIDCom’s activities. One
improvement that would be appreciated though is for the
NDCA (hard copies of which is difficult
to come by), to be uploaded for easy access on the
website.

February 2020

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