Capital Gains Tax Hike Sparks Investor Sell-Off Fears in Nigeria Ahead of 2026 Implementation
Nigeria’s newly introduced Capital Gains Tax (CGT), set to take effect on January 1, 2026, has sparked concerns among analysts and investors about potential negative effects on investment and macroeconomic stability. The controversial move, introduced under the Nigeria Tax Act 2025, increases the CGT rate for corporate organizations from 10% to 30%, while individuals will be taxed according to their personal income tax bands, with rates ranging from 0% to 25%. The revised law aims to boost federal revenue, but experts warn it could discourage capital inflows.
Market reactions have already been felt, with the Nigerian Exchange (NGX) experiencing panic-driven sell-offs that erased approximately N1.8 trillion in market value within four trading sessions. Analysts note that many investors are now considering selling assets before the end of the year to take advantage of the existing 10% CGT rate, raising concerns over short-term market volatility and capital erosion.
Business leaders and capital market operators argue that the tax hike could have broader implications for venture capital, real estate, and other key sectors. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), told Nairametrics that the government’s focus on revenue appears to overshadow investment growth, describing the 30% rate as “excessive” at a critical time for Nigeria’s economic recovery. He warned that such a steep increase could undermine the country’s ability to attract both domestic and foreign investors.
Despite investor fears, the government has sought to reassure the public. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, clarified that the 25% CGT would primarily apply to sales of shares where proceeds are reinvested in non-equity assets. Oyedele emphasized that most retail investors would remain unaffected, thanks to a N150 million annual exemption threshold covering 99.9% of small-scale investors. He defended the tax as progressive rather than socialist, aiming to fairly tax the wealthy while exempting the majority of Nigerians.
Investment analysts, however, suggest a mixed outcome. Oluwaseun Adeniji of CardinalStone Partners highlighted that while the tax could create short-term sell pressure and reduce equity market participation, it might improve fiscal transparency and support government revenue over the medium term if implemented consistently. Investors are reassessing portfolios to mitigate tax exposure, with some selling assets at the current rate and repurchasing in 2026 to reset their cost base, a strategy that reflects growing caution in Nigeria’s capital markets.
source: Nairametrics