Nigeria’s new capital gains tax: what investors should know

Barbara Bako, Abuja.

The Presidential Fiscal Policy & Tax Reforms Committee has unveiled Nigeria’s new Capital Gains Tax (CGT) framework, designed to promote fairness, reduce investment risk, and encourage long‑term participation in the capital market.

While media coverage has largely focused on headline changes such as progressive tax rates, exemptions, and cost‑base resets, analysts say some critical implications remain under-reported.

Under the new rules, the cost base for existing investments will be reset to the higher of actual acquisition cost or the closing market price as at 31 December 2025.

While this protects investors from retroactive taxation, experts note that in a high‑inflation environment, taxing nominal gains without adjustment for inflation could erode real investment returns.

Investors may therefore face taxes on gains that do not reflect true purchasing‑power growth, particularly those holding shares long-term.

Foreign investors, who play a key role in market liquidity, could also be affected.

Media reports have highlighted CGT rates and exemptions, but few have addressed the combined effect of tax, foreign exchange risks, and repatriation procedures.

This gap may influence investment decisions and make Nigeria less competitive relative to other frontier markets.

The reform also introduces broader compliance obligations. Investors must maintain detailed records of acquisition costs, sales proceeds, and allowable expenses, while brokers and exchanges will need to verify deductions such as transaction fees, margin interest, and foreign exchange losses.

The operational complexity, particularly for investors with long-standing or complex holdings, could increase administrative costs and affect market behavior.

Market observers warn that investors may alter trading strategies to minimize tax exposure, potentially favoring short-term disposals or reinvestments.

While the reforms aim to harmonize the tax system, protect small investors, and encourage reinvestment, careful implementation and clear regulatory guidance will be essential to achieve these goals.

As the CGT rules take effect on 1 January 2026, investors are encouraged to review their portfolios carefully and assess real after-tax returns, considering inflation, currency fluctuations, and compliance requirements.