30% Capital Gains Tax May Trigger Investor Flight, Double Taxation Fears in Nigeria’s Capital Market
Nigeria’s proposed 30 per cent Capital Gains Tax (CGT) on capital market transactions above ₦150 million has sparked widespread concern among market operators and economists, who warn that the policy could undermine investor confidence and weaken the already shallow market. While the Federal Government is seeking to raise revenue, analysts argue that the timing and scale of the tax could discourage both foreign and local investment in an economy battling high inflation, currency volatility, and fragile growth.
Market experts say the tax will directly reduce investment returns, making Nigeria less attractive compared to competing emerging and frontier markets. Charles Sanni, Chief Executive of Cowry Treasurers Limited, explained that the burden of CGT ultimately falls on investors, not brokers, and significantly alters investment decisions. According to him, a 10 per cent return quickly drops to seven per cent after tax, which becomes unattractive when inflation remains well above that level, effectively wiping out real gains.
Concerns are even sharper for foreign investors, who may face double taxation—first in Nigeria and again in their home countries. Sanni warned that global investors constantly compare post-tax returns across markets, and a higher CGT could push capital toward jurisdictions with more favourable tax regimes. Such an outcome, analysts note, could weaken foreign portfolio inflows that are crucial for market liquidity, foreign exchange stability, and overall investor confidence.
Investment banker Tajudeen Olayinka highlighted that the ₦150 million threshold mainly affects institutional and high-net-worth investors who act as liquidity providers in the market. He cautioned that their withdrawal could heighten liquidity risks, indirectly impacting smaller investors through weaker pricing and higher volatility. Olayinka also recalled that a previous 10 per cent CGT introduced in the 1990s was suspended to allow the market to develop, questioning whether Nigeria’s capital market is mature enough to absorb a much higher tax rate today.
Other market leaders, including Highcap Securities Managing Director David Adonri, warned that the policy could accelerate capital flight and contradict the goal of capital market regulation, which is to protect and encourage investors. While acknowledging the government’s revenue needs, stakeholders are calling for a suspension of the proposed tax and deeper engagement with market participants. They argue that without a balanced approach, Nigeria risks slowing capital formation, reducing competitiveness, and weakening a critical engine for long-term economic growth.
source: punch