Nigeria Clarifies 25% Capital Gains Tax on Share Sales Reinvested in Fixed Income Assets
The Federal Government has provided fresh clarity on how its newly introduced 25% Capital Gains Tax (CGT) on share disposals will work, addressing widespread concerns among capital market operators. Speaking at a stakeholder session hosted by the Nigerian Exchange Group (NGX), Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, explained that the new tax rate will apply specifically when proceeds from share sales are reinvested in fixed income securities or non-equity assets.
According to Oyedele, the policy is structured to shield ordinary retail investors. An annual exemption threshold of ₦150 million ensures that about 99.9% of individual investors remain unaffected. “Only very few big investors cross that threshold, mostly institutional players or high net-worth individuals,” he said. This means pension funds, asset managers and large portfolio investors will feel the brunt of the new tax, while small and medium retail shareholders are largely in the clear.
The exemption applies only when proceeds from share disposals are reinvested in another Nigerian company—whether listed or unlisted—thereby keeping funds within the country’s equity markets. However, once investors shift their money into government bonds, treasury bills or other fixed income products, the 25% CGT kicks in. Oyedele stressed that this rule is designed to encourage productive capital formation, protect jobs and stimulate long-term economic growth rather than penalize equity investors.
On cost determination, Oyedele admitted that using the original purchase price as the reference point—even if the shares were bought years ago—creates distortions because inflation and naira depreciation make historical costs look unrealistically low. Although indexation was considered to adjust for inflation, he said the data challenges made it unworkable for now. He also acknowledged investor concerns about exchange-rate swings, noting that many who entered before May 2023 had already gained significantly from the naira’s sharp fall. “We cannot use the tax system to solve all macroeconomic problems,” he added.
Despite the short-term pain for some investors, Oyedele emphasized that the reforms are aimed at stronger company fundamentals, improved valuations and more sustainable fiscal outcomes over the medium to long term. The NGX described the engagement as part of its broader effort to provide transparency, improve investor confidence and ensure the capital market continues to drive Nigeria’s economic prosperity. For retail investors, the exemption threshold means business as usual; for institutional players, it may reshape asset allocation strategies and highlight the government’s wider push to use tax policy as a tool for economic transformation rather than just revenue collection.
source: nairametrics