Nigeria’s decision to reintroduce capital gains tax on equity investments is reshaping conversations across the capital market, exposing deeper concerns about confidence, competitiveness and the country’s ability to balance revenue needs with long-term market growth.
Trading activity slowed noticeably in November as investors reacted to the government’s plan to impose capital gains tax on profits from share sales. Dealers and fund managers adopted a cautious stance, with many investors reassessing their exposure amid fears that the policy would raise the overall cost of investing in Nigerian equities.
Under the new framework, profits above N150 million from equity transactions will attract a 30 per cent capital gains tax. While authorities have described the measure as a necessary step to boost government revenue, market participants say the timing has amplified existing vulnerabilities in an environment already challenged by volatility, currency pressures and fragile investor sentiment.
Institutional and foreign investors, traditionally key sources of liquidity and stability in the equities market, are now questioning Nigeria’s attractiveness compared with other emerging markets where capital gains taxes are either minimal or absent. Analysts warn that higher transaction costs could weaken the risk-reward balance for investors and encourage capital to flow to competing markets.
The revised tax regime introduces sweeping changes. Capital gains tax for companies has been raised from 10 per cent to 30 per cent, aligning it with the Companies Income Tax rate. Individuals will also pay capital gains tax based on applicable personal income tax bands, while indirect transfers of shares in Nigerian companies—such as offshore disposals—are now taxable, subject to treaty exemptions.
Although the exemption threshold for share disposals has been increased from N100 million to N150 million within a 12-month period, provided gains do not exceed N10 million, investors argue that the broader implications outweigh the relief. Small companies with annual turnover of N100 million or less and limited fixed assets remain exempt from the tax.
Market operators say the policy has already influenced investor behaviour. Some investors have reduced exposure, others are delaying fresh investments, while foreign participants—who have alternative markets to consider—are reportedly adopting a wait-and-see approach.
Capital market experts note that Nigeria is competing with peers such as Ghana and other frontier markets for global capital, making policy consistency critical. They caution that even marginal increases in investment costs can significantly alter capital flows, particularly for foreign portfolio investors.
Government efforts to clarify the tax structure have eased some concerns, especially fears of retroactive taxation. Authorities have confirmed that only gains realised after December 31, 2025, will be taxed, using the market value on that date as the cost base. In addition, provisions allowing investors to defer tax payments by reinvesting proceeds into other equities may help reduce abrupt market exits.
Still, analysts say the policy has tested investor confidence at a sensitive time. While Nigeria’s revenue needs are clear, market participants stress that sustaining capital market growth will depend on striking a careful balance between taxation and maintaining an environment that attracts long-term investment.
