Authors: Oseinoma Okpeku(Partner), Tunji Muritala (Partner), and Onyinye Nnoli(Associate). The Law Crest LLP
Legality of the EEL: Denomination of the Levy in Foreign Currency
The Expatriate Employment Levy (EEL) is denominated in the United States Dollars contrary to the extant laws on currency substitution and dollarisation of the Nigerian economy. The Central Bank of Nigeria (“CBN”), pursuant to Section 15 of the CBN Act 2007 which provides that the unit of currency in Nigeria shall be the Naira, introduced a circular on currency substitution and dollarisation of the Nigerian economy on 17th April 2015. The circular provides that no transaction shall be consummated in a foreign currency.
On 21st May 2015, the CBN released a further circular to make some clarifications on its circular of 17th April 2015. The clarification circular exempted some revenue generating agencies of the government from the framework of the circular in the following manner: “The underlisted revenue generating agencies of government and operators permitted by law, whose business transactions allow payments/receipts in foreign currencies are however exempted. These include: (i) Federal Inland Revenue Service, (ii) Nigerian Ports Authority, (iii) Nigerian Maritime Administration and Safety Agency, (iv) Federal Airport Authority of Nigeria, (v) Nigeria Airspace Management Agency, (vi) Nigeria Shippers Council, (vii) Operators in the Oil and Gas including Oil Service Companies, (viii) Operators in the Maritime and Aviation industries, (ix) Licensed operators in the Export Processing and Free Trade Zones and (x) any other agency that may be prescribed by CBN from time to time.
As evident from the above, neither the NIS saddled with the responsibility of implementing the EEL nor the Ministry of Interior is included as one of the government agencies exempted from the framework of the circular. The express mention of those agencies referenced in the clarification circular automatically excludes agencies not mentioned as held in the case of Umar v Zailani & Ors(2023) LPELR-59471(CA) Page 26 Paragraphs C-D.
Accordingly, having not been included in the exemption list, the denomination of the EEL in United States Dollars is illegal and renders the imposition void. The CBN is regulator on issues relating to currency and the government must adhere to the stipulations of the CBN in this regard.
Legality of the EEL: Criminalising Acts in the Handbook in the Absence of an Enabling Statutory Provision/Imposition of Fine
By Paragraph 6.3 of the Handbook, the following acts are criminalised and made offences: (i) Failure to file EEL within 30 days, (ii) failure to register new employees within 30 days, (iii) falsification of information on EEL, and (iv) failure to renew EEL within 30 days. The criminalisation of the above acts through the Handbook is illegal as the criminalisation of the acts can only be validly achieved through an Act of the National Assembly. In George v FRN (2013) LPELR-21895(SC), the Supreme Court reiterated this trite position when Fabiyi, JSC held at pages 18-19, paras. A-A as follows: “Any conduct that must be sanctioned must be expressly stated in a written law to wit: an Act by the National Assembly.” Since, the acts sought to be criminalised under the Handbook are not contained in any Act of the National Assembly, they are not offences known to law.
As a corollary to the above point, the position of the law today is that a government agency or body does not have the power to impose fines as the power to make such imposition constitutionally resides with the court. This was the decision of the Court of Appeal in the case of NOSDRA v Exxonmobil(2019) LPELR-44210(CA. In that case, NOSDRA imposed a penalty of N10,000,000 (Ten Million Naira) on ExxonMobil for an alleged contravention of the provision NOSDRA Act and the Court of Appeal was faced with the determination of the legality of the statutory power of NOSDRA to impose penalty fees for contravention of the NOSDRA Act. In ruling that NOSDRA does not have the power to impose fine even though the power to impose the fine is codified in the law, the Court of Appeal held that awarding a fine is a judicial act and it is the sole prerogative of a Court of law under Section 6 of the Constitution. No other organisations or bodies can usurp that power. Any law that would consign to anybody other than the Courts the power to award fine is unconstitutional. Based on the above decision, the fines imposed under the Handbook are illegal and amount to a usurpation of the constitutional powers of the Courts.
In addition, beyond the fact that the imposition of fine by a government body contravenes the Constitution as held in the Exxonmobil case, the Immigration Act which is the principal legislation on immigration matters has not vested the authority to impose fines on the Minister. It is a fundamental principle of law that the imposition of fines as sanction through subsidiary legislation must be explicitly authorised within the principal legislation to render such authority enforceable. Thus, the Minister acted ultra vires his power to have imposed fines for non-compliance with the provision of the Handbook. We refer to the case of Shell (Nig) Exploration and Production Co. Ltd v. National Oil Spill Detection and Response Agency (2021) LPELR – 53068 (CA), the Court of Appeal per Ekanem JCA at pages 41-43 (paras A-D) reiterated the principle that the power to impose fines or penalties by an administrative body must be embedded in the substantive legislation. The Court held as that: “A subsidiary A subsidiary legislation must be consistent with the principal legislation from which it derives its life otherwise such subsidiary legislation is a nullity to the extent of the inconsistency. A subsidiary legislation must be consistent with the principal legislation from which it derives its life otherwise such subsidiary legislation is a nullity to the extent of the inconsistency. Therefore, the Oil Spill Recovery, Clean-up, Remediation and Damage Assessment Regulations cannot be used as an instrument to expand the boundaries of the powers given to NOSDRA to include the power to impose penalties, levies, fines etc”.
The authority of Shell (Nig) Exploration and Production Co. Ltd v. National Oil Spill Detection and Response Agency clearly re-affirmed the principle that the authority to impose penalties by an administrative body must emanate from a legislation. Having shown that the Immigration Act only authorised the Minister to make regulations in furtherance of the principal Act without more, it therefore remains to say that the Handbook cannot be used as an instrument to expand the boundaries of the powers given to the Minister under the Immigration Act. Doing so nullifies such acts of the Minister.
If by stretch of the imagination, the view is taken that fines imposed by the Handbook are rooted in a principal legislation, the fines are still illegal and unlawful as they exceed the maximum fine that can be imposed through a subsidiary instrument. Section 12(1)(c) of the Interpretation Act provides that “where an Act confers a power to make a subsidiary instrument, proclamation or notification, the power shall include in the case of a subsidiary instrument, power to prescribe punishments for contraventions of provisions of the instrument, not exceeding as respects a particular contravention- (i) in the case of rules of court imprisonment for a term of three months or a fine of fifty naira or both, (ii) in any other case, imprisonment for a term of six months or a fine of one hundred naira or both”. The fine of N3,000,000.00 (Three Million Naira) prescribed by the Handbook exceed the limit prescribed by the Interpretation Act and as such, it is illegal.
Legality of the EEL: Treaty Obligation of the Government/Contravention of Convention 111
Paragraph 1.3 of the Tax Policy mandates that Nigerian tax laws must respect international laws and treaty obligations. In addition, with the advent of the Third Alteration to the Constitution, ratified conventions are directly applicable in Nigeria.
Convention 111 which was ratified by Nigeria in 2002 prohibits discrimination on account of race. Each member state, including the Nigerian government, undertook to declare and pursue a national policy designed to promote, by methods appropriate to national conditions and practice, equality of opportunity and treatment in respect of employment and occupation, with a view to eliminating any discrimination in respect thereof. However, it appears that imposing an employment levy on expatriates without imposing a similar levy on Nigerians is a form of discrimination on account of race which runs contrary to Convention C111. Convention C111 is enforceable in Nigeria pursuant to the powers bestowed on the National Industrial Court under Section 254C of the Constitution. Thus, the EEL may be termed discriminatory on account of race and declared illegal for contravening Convention C111 which is enforceable under the Constitution.
Potential Impact of the on Operations of Organisations
The EEL will apply to organisations in Nigeria where the organisations have directors or employees working in Nigeria for an aggregate period of not less than183 days within a fiscal year. Where this is the case, it will undoubtedly have the following potential impact on operations:
1. Drastic Increase in Cost of Labour
The EEL is poised to significantly elevate expenditure on expatriate labour as the levy is payable on each expatriate employee annually.
2. Increased Expenditure on Compliance Measures
Heightened regulatory scrutiny from the relevant enforcement agency tasked with overseeing EEL Handbook compliance. To meet compliance requirements under the EEL Handbook, organisations will need to allocate resources in man hours for overseeing and ensuring compliance on ongoing basis.
Push Back from Stakeholders/Suspension of the Implementation of EEL
On the ground, there has been some pushback from stakeholders and interest groups against the implementation of the EEL on the basis that it could have counterproductive effects and make Nigeria a less appealing location for Foreign Direct Investment as companies often require the expertise of expatriates to navigate complex technological and operational challenges. Notably, Nigeria Employers’ Consultative Association (NECA) has taken a proactive stance and registered its dissent requesting the cancellation of the guideline. The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) called for the suspension of the implementation of the EEL. Consequently, in its press release of 8th March 2024, the Ministry of Interior confirmed that the implementation of the EEL has been put on hold.
Conclusion
We note the use of the word “suspend” as opposed to “discontinue”. The implication of this is that the government can re-introduce this policy at a future date.
We remain of the view that the organised private sector being the only affected sector should continue to engage with the government on the subject matter.
