FRESH controversy has engulfed the Nigerian capital market as fears over the alleged implementation of a higher Capital Gains Tax (CGT) continue to rattle investors despite repeated official clarifications. The anxiety, which persists even as authorities insist that most retail investors remain exempt, has triggered a wave of sell-offs that wiped out trillions of naira in market value.

As of the end of November 2025, blue-chip companies listed on the Nigerian Exchange Limited (NGX) suffered a staggering N4.95 trillion erosion in valuation among just 10 leading firms. The companies—including Dangote Cement Plc, MTN Nigeria Communications Plc, BUA Cement Plc, Airtel Africa Plc, and Nestlé Nigeria Plc, make up more than half of the exchange’s total market capitalisation.

Overall, the equities market shed N6.54 trillion in November alone, marking what many analysts consider the worst month for the market in 2025.

According to market operators, the sharp decline reflects panic-driven profit-taking as investors rush to exit positions ahead of the anticipated CGT increase scheduled for January 1, 2026.

A university don and capital market researcher, Dr. Yemisi Ayinde, described the development as a clear indicator of the market’s vulnerability to abrupt fiscal changes.

“In all honesty, the steep N4.95 trillion erosion in the valuation of ten leading Nigerian listed companies, driven obviously by investor retreat ahead of the proposed January 2026 imposition of a 30 percent Capital Gains Tax, definitely underscores the market’s acute sensitivity to abrupt fiscal recalibrations,” she said.

“This reflects not merely routine profit-taking but deeper apprehension that heightened taxation could compress future yields, dampen liquidity, and disincentivise long-term portfolio commitments — particularly among institutional and foreign investors whose confidence is pivotal. To mitigate further erosion, the government ought to adopt a phased or tiered implementation, provide clear transitional guidelines, broaden stakeholder consultation, and pair the tax reform with incentives that enhance market productivity and transparency.”

Under the Nigeria Tax Act 2025, CGT on share disposals is expected to rise from a flat 10 percent to as high as 30 percent for large transactions—a development critics say may drive capital away from the equities market.

Analysts warn that the steep rate, especially for foreign portfolio investors, could make Nigeria less competitive compared to jurisdictions with lower tax burdens.

Market unease has been compounded by ambiguities surrounding implementation rules — including uncertainty over reinvestment provisions, exemptions, and the interaction of CGT with other fiscal changes.

In response, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, reiterated that over 99 percent of retail investors remain exempt, as their portfolios fall below the ₦150 million threshold. He further noted the government’s intention to moderate the top CGT rate to 25 percent in 2026.

The Senate has also waded into the matter, urging the Ministry of Finance to review the policy amid fears that sustained capital flight could undermine market stability.

While government officials argue that the revamped CGT framework will modernise Nigeria’s tax regime, broaden non-oil revenue, and promote fairness by ensuring high-net-worth investors contribute adequately, critics maintain that the timing and steepness of the rate risk short- to medium-term disruption.

Analysts caution that blue-chip stocks — historically the anchor for foreign inflows due to strong fundamentals — may face prolonged underperformance until clarity returns. They warn that without transparent guidelines and transitional arrangements, Nigeria risks diverting investment flows toward more tax-friendly frontier markets.

As the debate intensifies, the unfolding events highlight a central dilemma: balancing the federal government’s drive for improved tax revenues with the imperative of maintaining investor confidence and market liquidity. Whether the CGT reforms ultimately strengthen or destabilise the capital market will depend squarely on execution — clarity, timing, and policy consistency.

 

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