Analysts Warn Nigeria Risks Losing FTSE Frontier Market Status Over Capital Gains Tax Plan
Financial experts have raised alarms that Nigeria may jeopardize its fragile progress toward regaining a spot in the FTSE Frontier Market Index if it proceeds with the proposed Capital Gains Tax (CGT) on securities transactions. The warning comes just weeks after the FTSE Russell “Quality of Markets” Review acknowledged improvements in transparency and liquidity within Nigeria’s foreign exchange (FX) market — progress that analysts fear could be reversed by a poorly timed tax policy.
According to Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co., the economic impact of the CGT will largely depend on how the policy is implemented. He explained that while capital gains tax isn’t new in Nigeria, it will primarily affect large transactions above ₦150 million, with most retail investors exempt. Olubunmi noted that the tax would be waived if profits were reinvested in another equity instrument, but warned that big-ticket investors might adopt aggressive tax planning strategies to minimize exposure.
A senior market analyst, who asked not to be named, described the proposed tax as “a move at the wrong time,” cautioning that it could undermine one of the few areas where Nigeria had shown improvement in the FTSE review — taxation. “Today is not the day for capital gains tax,” he said. “It risks undoing our fragile progress and could easily downgrade one of the few scores we actually passed.” The analyst stressed that Nigeria’s path back to the FTSE Frontier Index and ultimately the MSCI Emerging Market Index depends not just on policy announcements but on consistent, credible execution that restores investor confidence.
The analyst further highlighted structural weaknesses in the Nigerian market, including weak investor protection, outdated clearing systems, and limited market infrastructure. Nigeria’s clearing and settlement cycle still operates on T+3, compared to the global T+1 and T+2 standards, making transactions slower and riskier. He also pointed to governance gaps among key regulators — the Nigerian Exchange (NGX), Central Securities Clearing System (CSCS), and Securities and Exchange Commission (SEC) — saying bureaucratic delays were stalling progress. “A market that cannot settle efficiently is a market that carries unnecessary risk,” he warned.
Despite the concerns, analysts acknowledged that Nigeria has made measurable progress since its 2023 downgrade, particularly through the Central Bank of Nigeria’s (CBN) efforts to unify exchange rates and clear FX backlogs. However, they maintained that policy consistency, predictable taxation, and stronger governance are essential to sustain recovery. As one analyst concluded, “The FTSE report is not unfair — it’s a mirror. Until Nigeria fixes its infrastructure, enforces rules, and builds investor trust, the global verdict will remain the same: Not Met.”
source: THIS DAY