Operators in Nigeria’s capital markets have urged Mr. Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms (FPTR), to reconsider the proposed 30 percent capital gains tax (CGT) on share disposals.
The rate, slated to take effect from January 2026, is viewed by market players as overly burdensome.
In an open letter dated October 2, 2025, the capital market operators warned that the new CGT could exert intense pressure on the Nigerian Exchange (NGX) before year’s end, as both domestic and foreign institutional investors might seek to realize their gains under the current, more favorable tax regime.
They noted that returns on the stock market had already soared: the NGX’s average investors’ return reached ₦27.82 trillion over nine months, largely driven by improved confidence following federal foreign-exchange reforms.
The market capitalization began 2025 at ₦62.763 trillion and rose by 44.3 percent, closing September at ₦90.581 trillion.
In their letter, signed by Mr. Kato Mukuru, CEO of Emerging & Frontier Capital (EFC), the operators argue that the proposed tax fails to satisfy the FPTR’s seventh guiding principle, which demands equitable treatment for all stakeholders, including both local and foreign investors, as well as all levels of government.
While the proposal exempts retail investors with gains under ₦150 million annually (which, they claim, covers 99.9 percent of domestic retail investors), and leaves some exemptions for pension funds and large domestic capital sources, no similar relief is provided for institutional investors.
They suggested that the capital gains tax rate be reduced to 25 percent for cases in which proceeds from share sales are reinvested into fixed-income or other non-equity assets. But they questioned the fairness of this carve-out, especially for funds confined to equity investments.
The letter also raised concerns about the use of the acquisition cost as the reference base for calculating gains, especially for long-held shares, recommending instead that any tax changes begin from the implementation date (January 2026) to avoid penalizing past investments.
Furthermore, the operators contend that the lack of clarity for foreign investors, who must now factor the CGT into their valuations in addition to foreign-exchange risk, will hurt Nigeria’s competitiveness. A higher cost of equity, they argue, means Nigeria must deliver stronger returns to attract international capital.
If the 30 percent capital gains tax is imposed, they warn, it would likely drive institutional capital out of equities prematurely, undermining growth, job creation, and long-term investment in listed firms.
Meanwhile, the NGX All-Share Index closed the first nine months of 2025 at 142,710.48 basis points, a 38.65 percent gain over the 2024 close of 102,926.40.
Analysts attributed the robust performance to a stabilizing foreign-exchange environment, corporate earnings recovery, improved liquidity, reduced interest rates, and policy reforms in the banking and insurance sectors.
Among other positive indicators, the Central Bank’s Monetary Policy Committee trimmed the Monetary Policy Rate (MPR) to 27 percent, the inflation rate stood at 20.12 percent (as of August), and yields on Nigerian Treasury Bills fell to 15 percent (down from 18 percent).
As the market environment becomes less favorable for fixed income, many investors are turning toward equities. And if corporations continue to deliver strong earnings and declare dividends, demand for stocks may also stay strong.
[Source: ThisDayLive]
