Nigeria Fixed Income Market is being Taxed

The Securities and Exchange Commission (SEC)  began collecting income tax on bonds and short-term assets yesterday. 

This followed the expiration of a 2012 gazette which exempted Companies Income Tax (CIT) from bonds and short-term securities in the past 10 years.

The federal government had in 2012 granted tax waiver on all bonds and debt instruments issued by all tiers of government and corporate entities.

But the Securities and Exchange Commission (SEC) had last month introduced a 0.025 per cent charge on fixed income (Bonds) secondary market transactions, which was expected to become effective today.

The capital market regulator had in a circular explained: “It will charge 0.025 per cent of the total value of all secondary market transactions on bonds, while the Securities Exchange on which the transaction occurs will charge an amount not exceeding 0.025 per cent of the total value of secondary market transactions on bonds while bond transactions by dealing members will attract a single regulatory fee of 0.0001per cent of the total value of the secondary market transactions on bonds, and are exempt from the 0.025per cent fee charge earlier stated.”

Reacting to the development, capital market operators which included the Chartered Institute of Stockbrokers (CIS) and the Association of Securities Dealing Houses of Nigeria (ASHON) have expressed support for the move by the federal government.

President, Chartered Institute of Stockbrokers (CIS), Mr Olatunde Amolegbe said the introduction of the policy by the apex capital regulator would bring significant regulation to the market.

According to him: “The regulator’s decision comes at significant cost which needs to be covered by the ultimate beneficiaries, which are the investors. Therefore, there is no issue with the introduction of a regulatory charge on transactions.

“However, whether it should be as high as 0.02 per cent is open to discussion. We can’t lose sight of the fact that such will definitely increase the net yield on instruments, reduce spreads and might impact trade volumes. I am sure the market ecosystem will ultimately arise at a point of equilibrium for all participants.”