Investor Panic as Nigeria’s 25% Capital Gains Tax on Equities Sparks Fears of Capital Flight
Nigeria’s capital market is reeling from fresh anxiety following confirmation that a 25% Capital Gains Tax (CGT) on share disposals will take effect in January 2026. The policy clarification, made by Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, during a recent engagement with the Nigerian Exchange Group (NGX), has rattled investors and market participants. Under the new rule, investors who sell shares and reinvest in non-equity assets such as bonds or fixed-income securities will be required to pay the steep CGT — a move analysts warn could have unintended consequences for market stability.
Oyedele explained that the government intends to shield small investors, as the N150 million annual exemption threshold will exempt 99.9% of retail players. “Only a handful of large investors, mainly institutional players and high-net-worth individuals, will be affected,” he said. Yet, despite this assurance, fears persist that the measure could spark a sell-off or dissuade new entrants. Market operators argue that while the policy targets the wealthy, its ripple effects could undermine confidence and liquidity across the Nigerian Exchange.
Analysts and operators warn that the 25% rate could discourage foreign portfolio investors who have only recently begun to return to Nigerian equities. One market operator, speaking anonymously, described the move as “poorly conceived,” citing its lack of clarity, possible retroactive application, and steep rate. “This could raise the cost of equity, slow capital inflows, and stall the investment cycle just as Nigeria is trying to rebuild investor trust,” the operator said. Economists have urged the government to adopt global best practices—such as resetting cost bases to current market values, as seen in South Africa and India—to prevent taxing historic gains inflated by naira depreciation.
Business executives have echoed these concerns, warning that the policy could become punitive for both companies and investors. Otunba Adetunji Oyebanji, CEO of 11 Plc, noted that the combination of higher CGT rates and stricter compliance rules could strain already burdened enterprises. “The economy is fragile. Removing existing reliefs and raising taxes without a transition plan could harm long-term investment,” he cautioned. Oyebanji urged authorities to engage with stakeholders and phase in reforms gradually to prevent sudden market shocks.
The debate comes at a critical moment for Nigerian equities, with the All-Share Index up 38% year-to-date as of September 2025 — extending a five-year rally not seen since the early 2000s boom. Analysts fear that abrupt tax changes could derail this momentum, trigger capital flight, and erode investor confidence just as the government seeks to attract sustainable foreign investment. While the administration aims to broaden its tax base and reduce speculative trading, market watchers warn that without fairness, clarity, and consultation, the new CGT could stifle growth instead of supporting it. As one analyst succinctly put it: “Tax reforms should fuel prosperity, not fear.”
source: Nairametrics