Nigeria’s bold attempt to overhaul its tax system has entered a critical phase, following the introduction of a new Capital Gains Tax (CGT) framework that has sparked intense debate among investors and market participants. While some analysts have warned that the reform could trigger short-term shocks in the capital market, the Presidential Fiscal Policy and Tax Reforms Committee (PFPTC) insists that the policy is a major step toward restoring fairness, protecting investors, and aligning Nigeria’s tax regime with global standards.
The reform, expected to take effect from January 2026, replaces the decades-old flat 10 per cent CGT rate with a progressive rate system ranging from 0 to 30 per cent, depending on income levels.
This shift, according to the committee chairman, Taiwo Oyedele, is part of a broader vision to simplify Nigeria’s tax structure, expand its economic base, and make investment more predictable and rewarding for long-term participants.
Speaking in response to reports of panic selling and a sharp ₦4.64 trillion loss in market value yesterday, Oyedele clarified that much of the anxiety surrounding the new tax stemmed from misinterpretations and misinformation.
“While detailed implementation guidelines will be provided through official regulations, it is important to clarify the critical issues at this stage,” he said. “The new CGT framework represents a major improvement over the existing law. It makes investment in the Nigerian capital market more attractive, reduces investment risk, and ensures fair treatment of legitimate costs incurred by investors. In essence, the reform promotes equity and confidence in the market — not the reverse.”
His remarks came amid widespread concern that the 30 per cent top tax rate would erode profitability and dampen investor appetite. Oyedele, however, explained that only large corporate investors would fall under the top rate, which is itself expected to be reduced to 25 per cent under the ongoing corporate tax harmonisation plan.
In practical terms, small and institutional investors — including Pension Fund Administrators (PFAs), Real Estate Investment Trusts (REITs), and non-profit organisations — will remain exempt from the new CGT regime. Similarly, retail investors whose total annual share disposals do not exceed ₦150 million and whose gains remain below ₦10 million will pay no CGT at all.
The reformed framework introduces several pro-investor provisions. For the first time, taxpayers will be able to deduct capital losses and investment-related costs such as brokerage fees, margin interest, and regulatory charges when calculating their tax liability. This means investors will not be taxed on losses or unrealised gains — a significant improvement over the previous regime.
To further encourage reinvestment, the law grants full exemption for proceeds reinvested into Nigerian companies within 12 months. This incentive aims to keep liquidity within the domestic market, supporting local firms and promoting capital retention.
Additionally, Oyedele clarified that for investments made before 2026, the cost base would be “reset” to the higher of the actual acquisition cost or the market value as at 31 December 2025, ensuring that old gains are not unfairly taxed under the new law.
The Capital Gains Tax reform is not an isolated policy. It is part of a comprehensive fiscal reset being championed by President Bola Ahmed Tinubu’s administration to modernise Nigeria’s tax system, stimulate growth, and improve compliance without overburdening businesses or individuals.
Since its inauguration in August 2023, the Presidential Fiscal Policy and Tax Reforms Committee — chaired by Oyedele, a globally respected fiscal expert — has pursued a three-pronged agenda: fiscal consolidation, tax simplification, and business competitiveness.
Over the past year, the committee has rolled out several initiatives aimed at reducing the number of taxes, streamlining administration between federal and subnational authorities, and merging multiple revenue agencies to improve efficiency.
Nigeria’s tax-to-GDP ratio, currently around 10.8 per cent, remains one of the lowest in Africa, far below the continental average of 18–20 per cent. Yet, the government insists that the solution is not in increasing rates but in expanding the tax base and improving transparency.
According to Oyedele, the new tax reforms “are not revenue-driven, but designed to achieve harmonisation, promote fairness, competitiveness, long-term investment, and confidence in Nigeria’s capital markets.”
Despite the committee’s assurances, market reactions in recent weeks have been sharp. Analysts attribute this partly to information gaps and the psychological impact of sudden policy changes in a sensitive market already grappling with currency volatility and inflationary pressures.
Data from the Nigerian Exchange (NGX) showed that the equities market lost over N4.6 trillion in one day and N2 trillion the previous week following initial reports of the CGT rate change. However, market experts say the sell-off could reverse once investors fully understand the exemptions and reinvestment incentives embedded in the policy.
“Investors typically react to uncertainty, not necessarily to higher taxes,” said Dr. Tunde Oyekan, a capital market analyst. “Once the guidelines are published and investors see that small holdings, PFAs, and long-term portfolios are protected, we should see confidence return to the market.”
Others agree that the reform could bring long-term credibility to Nigeria’s financial markets. By aligning with global standards, the CGT system could attract more institutional capital — particularly from development finance institutions and foreign portfolio investors who prioritise transparency and consistency in fiscal policy.
Beyond the capital market, the tax reform package under Oyedele’s committee has been designed to improve the ease of doing business across sectors. The committee has recommended the consolidation of overlapping levies, the abolition of nuisance taxes, and the introduction of a single business tax identification system to simplify compliance.
These measures complement the Fiscal Policy and Tax Reform Roadmap (2024–2028), which aims to reduce the number of taxes from over 60 to fewer than 10 key categories. The reforms also propose digital tax administration, which will leverage technology to automate filings, reduce human contact, and close leakages.
By addressing inefficiencies, the federal government hopes to create a more predictable tax environment — one where businesses can plan, expand, and invest with confidence. The government has also been engaging state governments to harmonise tax collection and prevent multiple taxation — a persistent complaint among micro, small, and medium enterprises (MSMEs).
Ensuring Fairness and Transparency
One of the key concerns that the new CGT reform seeks to address is fairness. Under the old regime, investors paid tax on gross gains without considering transaction costs or losses — effectively taxing even unprofitable trades. The new approach not only corrects this imbalance but also integrates CGT within the broader income tax framework to ensure consistency and progressivity.
Resident individuals will now pay CGT to their state of residence, while companies will remit directly to the Nigeria Revenue Service (NRS). Non-resident investors can either pay directly or through approved withholding agents such as brokers and exchanges. This system decentralises tax administration, enhances accountability, and ensures that states benefit directly from local investment activities.
The ongoing fiscal reform, particularly the Capital Gains Tax restructuring, underscores the government’s attempt to strike a delicate balance between revenue generation and investor confidence. It represents a move away from arbitrary taxation towards a rules-based, equitable framework that supports long-term capital formation.
While the short-term reactions in the market may appear unsettling, experts believe the long-term gains far outweigh the temporary volatility. With clear exemptions for small and institutional investors, reinvestment incentives, and a transparent cost-deduction system, the reform could become a cornerstone of Nigeria’s economic renewal.
As Oyedele aptly noted, the intent of the reform “is not to punish investors, but to protect them.” It is, in his words, “a fairer, simpler, and globally competitive tax framework that encourages responsible investment, deepens financial inclusion, and positions Nigeria’s capital market for sustainable growth.”
