The Nigerian government recently unveiled a new capital gains tax (CGT) that aims to make the system more progressive.
The new regime, which will commence on January 1, 2026, is rumored to increase CGT from 10 per cent to 30 per cent unless the proceeds are reinvested in other listed or unlisted domestic equities.
Many stakeholders, including capital markets, have expressed concerns that the rumored hike would put the country's stocks at risk and discourage foreign investment.
However, Taiwo Oyedele, Chairman of Nigeria's Presidential Committee on Fiscal Policy and Tax Reforms, recently took to his official X handle to provide clarity on this and many other frequently asked questions on Nigeria's new tax laws.
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He revealed that the CGT rate has not been increased to 30 per cent but has been integrated into individual and corporate income tax.
“This means the tax you pay on capital gains depends on your overall income level or company profits, making the system more progressive. Effectively, the applicable CGT rate under the new laws ranges from 0 per cent to 30 per cent,” Oyedele said.
CGT is a tax levied on gains from the sale of chargeable property such as shares, real estate or other investments.
Currently, CGT in Nigeria is charged at a flat rate of 10 per cent on all chargeable assets, regardless of the income level of the taxpayer.
“The reform makes CGT progressive so that lower earners either pay no CGT or pay less, while higher earners contribute a fair share. It also helps reduce distortions where income could previously have been misclassified as capital to enjoy a lower, flat CGT rate,” he added.
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Oyedele explained that CGT only applies to net profits, as capital losses can be offset by capital gains.
He said sales income of more than N150 million annually, where the profit does not exceed N10 million, is exempted. This means that approximately 99 percent of individual investors are effectively exempt.
“Where the income exceeds the exemption threshold, CGT is not payable if such income is reinvested in shares of a Nigerian company,” he said.
“Institutional investors such as pension funds are exempt from CGT, just as they are exempt from corporate income tax.”
He said companies undergoing restructuring, merger or reorganization are not subject to CGT on those transactions.
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Oyedele said CGT revenue is historically very small as it accounts for less than two percent of the revenue collected from corporate income tax (CIT) and value added tax (VAT).
“The reforms are about coherence, fairness and efficiency. In fact, businesses will benefit far more from the lower CIT rates and wider VAT input credit. For example, the Federal Inland Revenue Service (FIRS) collected only N52 billion from CGT in 2024 compared to more than N15 trillion from CIT and VAT. Sectors of N4.5 trillion from the lower CIT rate and wider VAT credit “Businesses in the U.S. are expected to benefit,” he explained.
He disclosed that most foreign investors can claim tax credits in their home countries for taxes paid in Nigeria under double taxation agreements or unilateral tax relief. This means that CGT paid in Nigeria will often not be an additional cost.
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These changes will not make Nigeria less attractive, he said, adding that the new rules are in line with international best practices.
“Many countries already apply progressive tax treatment to capital gains, and exemptions for small investors and reinvestment make Nigeria's regime competitive. When considered holistically, the new tax laws including a lower CIT rate and broader input VAT credit will improve companies' profitability, equity valuations and enhance overall investor returns,” Oyedele said.
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The tax chief said the CGT reform applies to all chargeable properties, unless specifically exempted.
He cited examples of exemptions other than the share limit, including individuals selling two personal vehicles per year and the sale of owner-occupied residential property.
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He said the reforms do not address inflation and exchange rate risks, stressing that inflation and currency risks affect all investments and cannot be eliminated through tax laws. “Investors are expected to manage these risks as part of their broader investment strategies.”
