In 2022, the National Immigration Service reported that a staggering 1,899,683 passports were issued, indicating a significant outflow of Nigerians seeking better opportunities abroad.
This phenomenon, often referred to as the “brain drain,” has caught the attention of experts and policymakers. Surprisingly, amidst this mass exodus, Nigeria’s billionaires remain resolute in their decision to stay.
Figures like Aliko Dangote have openly declared their commitment to the country, prompting an investigation into the reasons why these billionaires choose not to relocate.
Tax Rates: A Favorable Comparison
One crucial factor that may contribute to Nigerian billionaires’ decision to remain in the country is the significant disparity in tax rates between Nigeria and countries like Canada, the United Kingdom, and the United States.
- The Nigerian Federal Inland Revenue Service reports that only a small fraction of the labour force is captured in the tax net. In contrast, countries such as the United Kingdom have stringent measures in place to prevent tax evasion, especially for high-net-worth individuals like Femi Otedola and Aliko Dangote.
- For instance, if Aliko Dangote, with a net worth of $9.7 billion, were a resident of the United Kingdom, his tax liability would amount to up to 40% of his income. The UK’s progressive income tax system has different tax bands based on income levels, with the highest bracket being 45% for income above £150,000.
This stark contrast in tax rates presents a compelling financial incentive for Nigerian billionaires to stay put.
Economic Monopoly: A Distinct Advantage
In Nigeria, there are speculations that certain billionaires have been able to establish monopolistic business ventures with the support of the government.
One prominent example is the Dangote Group, which operates at the top of the manufacturing chain for staple food and building items.
Reports suggest that Dangote’s business empire owes much of its success to governmental support, including waivers and subsidies in foreign exchange.
However, in developed economies like the United States and the United Kingdom, antitrust laws are in place to promote fair competition and prevent the concentration of market power.
These laws ensure that mergers and acquisitions do not create monopolies, and if necessary, they break up firms that have become monopolistic.
Consequently, billionaires running businesses in these countries face stiffer competition, which may discourage them from relocating to more developed economies.
Income Inequality: A Disparity Challenge
In Nigeria, the business environment is characterized by significant wealth inequality, with a large gap between the rich and the poor
- Although Nigeria scored 35.1% on the 2022 Gini coefficient, indicating wealth inequality, the country still faces challenges in reducing unemployment rates, improving job income, and lowering housing prices.
- The minimum wage in Nigeria is among the lowest in the world, according to reports. Bloomberg highlights that nearly two-thirds of Nigeria’s population lives on less than $2 a day, with approximately 133 million Nigerians classified as “multi-dimensionally poor.”
However, in Nigeria, these basic necessities are often accessible only to the elites and middle class. This means that the elite class in Nigeria enjoys a higher standard of living. As a result, billionaires in Nigeria feel a sense of security in their wealth, unlike in the United States where these amenities are more widely available to the average person.
Economic Competition: A Landscape Comparison
Nigeria’s economy is still in its early stages of growth, grappling with challenges such as inflation, insecurity, and corruption.
These issues, combined with certain policies and macroeconomic shocks, have hindered the progress of many promising companies.
- Some businesses, like Opay, faced regulatory challenges that led to their demise as a logistics company.
- Without sufficient access to business funding, many companies have been forced to shut down, allowing established players to dominate the market. In contrast, developed countries like the United States and the United Kingdom boast thriving business environments with better access to funding.
- If Nigerian billionaires were to operate in these highly competitive landscapes, they would face formidable competitors capable of challenging their market position.
While the allure of developed economies may be enticing, these billionaires weigh the benefits against the unique opportunities and circumstances presented in Nigeria.
As the country strives to address these challenges and create a more conducive business environment, it may foster an atmosphere that encourages both billionaires and talented individuals to contribute to Nigeria’s growth and development. (Nairametrics)
