As Nigeria’s new tax reform laws take effect from January 1, 2026, one of the most debated changes is the overhaul of the Capital Gains Tax (CGT) regime under the four tax laws signed into law by President Bola Tinubu in June.
Designed by the Presidential Fiscal Policy and Tax Reforms Committee chaired by Taiwo Oyedele, the new framework aims to make taxation fairer, more progressive, and aligned with global best practices.
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But what does this mean for investors and the broader capital market?
What Is Capital Gains Tax?
Capital Gains Tax is levied on the profit or “gain” realised from the sale or disposal of certain assets such as shares, real estate, or vehicles.
Under the existing law, a flat 10% rate applies to all chargeable gains, regardless of the taxpayer’s income level or the size of the transaction.
The Major Shift: From Flat Rate to Progressive Tax
Contrary to fears that the government has raised CGT from 10% to 30%, the new rules integrate capital gains into personal and corporate income tax. This means tax will now be based on an individual’s total income or a company’s overall profits, resulting in progressive rates ranging from 0% to 30%.
In essence, small investors and low-income earners will pay little or no CGT, while high-income investors contribute proportionally more.
According to Oyedele, this approach is not about raising revenue but about fairness and efficiency, preventing situations where people reclassify income as capital gains just to enjoy a lower tax rate.
Relief for Small Investors
The new law provides broad exemptions and reliefs aimed at protecting small and medium-scale investors. For instance:
- Gains from sales where proceeds do not exceed ₦150 million annually or where the gains are below ₦10 million will be exempt from CGT.
- Investors who reinvest sale proceeds into shares of a Nigerian company will not pay CGT.
- Institutional investors, such as pension funds, remain exempt.
- Corporate reorganisations, mergers, or restructurings will also not attract CGT.
These measures mean that, by official estimates, about 99% of individual investors will not be affected by the new tax.
‘Not About Revenue But Fairness’
Although many investors initially worried about higher tax liabilities, the Federal Government insists the reform is not a revenue-raising measure.
CGT collections have historically contributed less than 2% of total tax receipts. In 2024, the Federal Inland Revenue Service (FIRS) collected about ₦52 billion from CGT, compared to over ₦15 trillion from Companies Income Tax (CIT) and Value Added Tax (VAT).
The new tax framework, officials argue, will actually benefit businesses through reduced CIT rates and broader VAT input credits, collectively worth an estimated ₦4.5 trillion in reliefs.
Foreign and Institutional Investors Protected
For foreign investors, the rules maintain a competitive edge. Most can claim tax credits in their home countries under double taxation agreements, ensuring CGT paid in Nigeria is not an additional cost.
Meanwhile, pension funds, mutual funds, and other institutional investors remain exempt, a move designed to maintain market stability.
Impact on Capital Market
There is a belief that the reforms could bring more predictability to the capital market and curb speculative trading. By tying CGT to income levels and encouraging reinvestment, the law seeks to reward long-term investment while discouraging tax avoidance schemes.
However, the true test will be in implementation, especially in ensuring compliance, investor education, and clarity around how historical costs and old holdings will be treated when the new regime takes effect in January 2026.
A Twist of Irony
Interestingly, Taiwo Oyedele — now the architect of this progressive reform — once criticised a similar CGT measure under the Finance Act 2021, introduced by the Buhari administration.
In January 2022, while speaking at the Nigerian Economic Outlook webinar organised by the RCCG’s King’s Court Parish, Oyedele, then Partner and Africa Tax Leader at PwC, warned that the 10% CGT on share disposals worth ₦100 million and above could discourage investments in the capital market and shift focus towards government securities.
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He described the move as having minimal revenue potential and capable of dampening investor sentiment, especially following the expiration of tax exemptions on corporate bonds.
Philip Ibitoye is a Special Correspondent with EKO HOT BLOG. Click here to find daily analysis and critical insight on trending issues in Lagos and other parts of Nigeria.
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