Follow Us on Google
By Chukwuma Umeorah
The Association of Securities Dealing Houses of Nigeria (ASHON) has called on the Federal Government to urgently reconsider its new capital gains tax (CGT) policy, warning that the changes could erode investor confidence and trigger capital flight from the Nigerian stock market.
Chairman of ASHON, Mr. Sam Onukwue, made the appeal following the implementation of the Nigeria Tax Act 2025, which significantly expands and raises capital gains tax obligations.
According to Onukwue, the reform, designed to boost government revenue, could have unintended consequences for market liquidity and participation. “We are concerned that the higher CGT rates and the removal of key exemptions will discourage both local and foreign investors, ultimately reducing activity on the Nigerian Exchange (NGX),” he said.
The new law aligns corporate-related chargeable gains with company tax rates and imposes steeper taxes on foreign disposals of shares, removing several long-standing reliefs that had previously encouraged market participation.
Market operators argue that while tax reforms are essential for fiscal sustainability, the capital market should not be overburdened in a way that reverses the gains made in recent years.
“The capital market is a critical driver of economic growth and investment mobilisation. Policies that make investing more expensive or unpredictable could push investors to other markets,” Onukwue cautioned.
He urged the government to engage with capital market stakeholders and consider a phased or moderated approach that balances revenue generation with market stability.
Financial analysts also note that the policy shift comes at a time when the market is still struggling to recover from global headwinds and domestic macroeconomic pressures. They warn that excessive taxation on investment returns could dampen sentiment just as renewed reforms are beginning to attract new listings and inflows.
ASHON reiterated its support for government efforts to improve revenue mobilisation but stressed that sustainable growth depends on policies that encourage productive investment rather than penalise it.
“We strongly recommend that the government reconsider its stance on capital gains tax as it affects capital market transactions. The government should also promote financial literacy at all levels, starting from schools and include capital market education in national curricula. Equally important is macroeconomic stability. A stable foreign exchange regime, lower inflation, and consistent policy implementation will significantly enhance investor confidence, both local and foreign,” he urged.
New development
Historically, Nigeria applied a flat 10 per cent CGT on chargeable gains and under a prior framework, sales of shares enjoyed significant exemptions. The Finance Act 2023 signed by President Bola Tinubu in June removed the blanket exemption on sales of shares and explicitly expanded the scope of assets chargeable to CGT notably by including digital assets. That change already reset expectations in the market and introduced new compliance obligations.
The Act raises the effective tax on gains from certain disposals to rates aligned with corporate tax. For most companies, this translates to a rate nearer to 30 per cent. The law also introduces thresholds and carve-outs: for example, an exemption threshold for small disposals. However, it widens the tax net by subjecting indirect transfers and various digital and cross-border transactions to tax. The government says the changes are intended to modernise the tax base and improve revenue collection, but market participants say the timing and scale require recalibration.
Market concerns
Other News
Institutional and retail brokers warn that the steep CGT increase, especially for foreign investors, could prompt a flurry of profit-taking in Q4 2025. A mass sell-off would depress equities, reduce liquidity, and distort valuations.
Some operators have asked the government to reduce the proposed top rate from 30 per cent to 25 per cent while calling for clearer implementation guidance. They point out that Nigeria’s proposed rates compare unfavourably with peer markets in the region, potentially eroding Nigeria’s competitiveness for foreign portfolio flows.
Analysts also flagged that the new rule contained specific mechanics: the higher rate will generally not apply if proceeds from a sale are immediately reinvested into other Nigerian securities, and different treatments apply depending on whether proceeds move into non-equity assets. Those carve-outs may blunt some negative effects, but investors and brokers say uncertainty around administrative details and enforcement remained a key risk.
ASHON’s appeal
Speaking on the state of the market and the role of brokers, ASHON’s Chairman, Onukwue described ASHON’s appeal as an effort to protect the long-term health of the capital market and preserve investor confidence. “Stockbrokers are the first line of defense for investors,” he said, underlining that licensed brokers perform advisory, due-diligence and compliance roles that guard retail and institutional clients against fraud and speculative pitfalls.
He warned that sudden, steep tax changes risk pushing investors back into cash or informal investments rather than into listed securities. According to him, “this would shrink liquidity and raise the cost of capital for Nigerian firms.”
Onukwue urged that tax policy should be calibrated to support market deepening rather than to discourage turnover and foreign participation. He reiterated ASHON’s earlier recommendations that the government consider targeted tax incentives for dividend-paying companies and to re-examine the impact of CGT on market transactions. “Offer reliefs or tax credits that make holding listed equities more attractive for income-seeking retail investors.”
He further urged continued consultation among market operators, the Securities and Exchange Commission (SEC), the Nigerian Exchange (NGX) and the Central Securities Clearing System (CSCS) to ensure that policy shifts remain operationally feasible and do not damage market stability.
Why it matters beyond tax revenue
The CGT concerns intersects with broader issues the market is grappling with including Investor confidence and education. Some stakeholders believe that retail participation in Nigeria remains relatively low and is constrained by a trust gap and limited financial literacy. Onukwue said the market “has moved from that era” of past frauds, but warned that policy shocks could rekindle skepticism unless accompanied by investor protection measures and education drives.
Settlement efficiency and technology reforms such as CSCS’s move to shorten settlement cycles to T+2 and T+1, and the wider adoption of digital onboarding and fintech platforms, are intended to strengthen market functioning and accessibility. Operators argue that tax policy should complement these operational improvements, not undermine them.
Moreover foreign investors also weigh inflation, exchange rate volatility, and capital repatriation risk when assessing returns. Onukwue flagged the need for “a stable foreign exchange regime, lower inflation, and consistent policy implementation.”
Impact on liquidity and listings
Market watchers say higher taxes on share disposals increase the relative attractiveness of dividend distributions and fixed-income instruments. That shift could reduce equity turnover and narrow the investor base for listed equities. Some reports suggest the federal government could still realise substantial revenue from a higher CGT, but operators counter that the long-term damage to market depth would outweigh short-term revenue gains.
