The Presidential Committee on Fiscal Policy and Tax Reforms has defended the new Capital Gains Tax (CGT) regime on shares, saying it is designed to reduce business risks, strengthen investor confidence, and create a fairer, more competitive tax system.
The clarification follows concerns raised by Otunba Adetunji Oyebanji, Chief Executive Officer of 11PLC, who argued that the recent increase in capital gains tax could discourage major investments in the country.
Oyebanji had warned that the rise in CGT from 10% to 30% under the newly enacted Nigeria Tax Act (NTA) could make the economy less attractive for high-capital projects.
FG Counters Industry Concerns
However, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, said during a virtual market engagement with the Nigerian Exchange Group (NGX) that the new regime is not punitive but strategically structured to stimulate investment.
“Under the old regime, capital gains on shares were taxed at a flat rate of 10%, with no relief for capital losses and limited exemptions,” Oyedele explained.
“The new regime introduces progressive taxation, where gains are taxed based on the payer’s income band, similar to practices in the U.S., U.K., South Africa, Ghana, and Brazil.”
According to Oyedele, the revised system now allows capital gains to be taxed on a net gains-and-losses basis, with reinvestment relief retained to encourage continuous investment in the market.
Key Exemptions and Reliefs
Oyedele further outlined several relief measures aimed at protecting small investors and businesses. Exemptions will apply to:
Small companies and individuals with proceeds of up to N150 million, or gains not exceeding N10 million.
Corporate reorganizations, which will continue to enjoy reorganization exemptions.
Dividends, which will still attract a low withholding tax rate.
He also noted that the government is working on broader fiscal measures to make Nigeria’s tax system more investment-friendly. These include:
- Reducing Companies Income Tax (CIT) from 30% to 25%.
- Harmonising multiple taxes from over 60 to fewer than 10.
- Eliminating minimum tax on turnover; and
- Raising the CGT exemption threshold on shares.
Nigeria Aligns with Global Best Practices
Oyedele added that the reform agenda goes beyond CGT and seeks to align Nigeria’s tax system with global standards, attract long-term capital, and make the country’s markets more competitive.
“We are also looking at exemptions for Real Estate Investment Trusts (REITs) and securities lending, allowing VAT credits on assets to reduce investment costs, and introducing personal income tax exemptions or final withholding tax on fixed income securities,” he said.
He stressed that the reforms aim to level the playing field, encourage compliance, and position the Nigerian capital market as a key driver of economic growth.
“Our ultimate goal is a fairer, simpler, and growth-oriented tax system that builds investor trust while ensuring fiscal sustainability,” Oyedele added.
What You Should Know
- Beyond the tax rate hike, Oyebanji also highlighted the challenges posed by new tax reporting requirements, warning that small and medium-sized enterprises (SMEs) could be disproportionately affected if the reforms are implemented without a transitional period.
- He said meeting the new tax reporting requirements will involve certain technology needs, including computers and digital systems, which may be a burden for small and medium-sized enterprises.
- According to Oyebanji, who is also the President of the Chartered Institute of Directors (CIoD), the institute has been engaging with agencies such as the Federal Inland Revenue Service (FIRS) and the Lagos State Tax Authority to provide constructive feedback.
