Let us begin by making one thing clear.
The goal is not to abolish Capital Gains Tax (CGT).
A well-designed CGT framework can strengthen Nigeria’s fiscal position while supporting market growth and investor confidence.
However, the current approach raises legitimate concerns that must be addressed if the reform is to succeed.
Many market participants are not opposed to CGT in principle, though there is widespread agreement that the rate is too high. The real worries lie in the details, how cost bases are determined, how reinvestments are treated, and how these rules will impact foreign portfolio investment (FPI) in Nigeria.
Introduce a Safe Harbour for Reinvestment
Investors who sell shares should be allowed to temporarily reinvest their proceeds in money-market or fixed-income instruments within a defined window of 90 to 180 days without triggering CGT. This encourages portfolio rebalancing, preserves liquidity, and helps maintain market depth.
Reset Cost Bases to the Date of Implementation
To ensure fairness and voluntary compliance, investors’ cost bases should be reset to the market value of their holdings on the effective date of the policy; otherwise, this is tantamount to a Landgrab. This prevents retroactive taxation on past gains and builds trust in the system.
Align CGT Rates with Peer Markets
Nigeria should benchmark its CGT rate to other frontier and emerging markets, which typically range between 5 and 15 percent. A moderate rate promotes compliance rather than avoidance and helps Nigeria remain competitive in the eyes of both domestic and foreign investors.
Offer Temporary Relief for Qualified Foreign Investors
Foreign investors with Certificates of Capital Importation (CCI) should be temporarily exempt from CGT until Nigeria’s tax-treaty network expands sufficiently to prevent double taxation. This would sustain portfolio inflows while the supporting tax infrastructure matures.
There is also a larger misconception driving this conversation. It has been argued that the improved cash flows resulting from allowable deductions and a lower corporate income tax (CIT) regime will more than offset the impact of a 25 percent CGT rate. That assumption does not hold true in practice.
The notion that taxation itself can encourage capital inflows depends on two critical factors: uniform tax treatment across markets and the existence of effective double taxation treaties. Where these are absent, tax becomes a deterrent rather than an incentive. Unfortunately, Nigeria currently has only 16 ratified double taxation treaties, and the United States—by far the largest source of global portfolio investment- is not among them.
This is the real issue that needs attention. The solution is not to remove tax collection from the source but to expand treaty coverage and modernise administrative capacity.
In most emerging and frontier markets, the United States accounts for roughly 50 to 60 percent of capital inflows. Many of these investments are structured through tax-exempt wrappers and collective vehicles. As a result, foreign investors may not even be able to claim tax credits in their home jurisdictions for taxes paid in Nigeria. This creates a structural disadvantage that undermines competitiveness.
It is unsustainable that the majority of Nigeria’s foreign inflows are concentrated in short-dated Central Bank instruments designed for liquidity management rather than nation-building. To evolve beyond hot-money cycles, the capital-flow profile must be rebalanced toward genuine equity participation.
Given the modest revenue that this new CGT regime is expected to generate, the policy feels counterproductive. The trade-off between limited fiscal gain and the potential damage to market confidence, liquidity, and valuations is simply not worth it.
At a time when Nigeria urgently needs to attract equity risk capital, not repel it, this measure sends the wrong signal. The government should have deferred implementation until the market regained sufficient depth and the administrative framework, especially around cost-based tracking, reinvestment rules, exemptions, and treaty coverage, was ready.
In its current form, the policy risks doing long-term reputational harm to Nigeria’s capital market in exchange for short-term fiscal optics.
“At a time when Nigeria desperately needs to attract equity risk capital, not repel it, this measure sends the wrong signal.”
This should be self-evident. Governor Cardoso has done a herculean job to stabilize the naira and attract flows to Nigeria; a lot of these investors are still on the fence when it comes to Nigeria. This is a call not to chase them away with this policy, which is not well thought out in its current form.
Thank you for this well written piece. I addition, there is no allowance for capital losses. In other tax jurisdictions one can balance out losses with gains. There is also the issue of inflation which is a quiet and hidden tax on every citizen.