Nigeria has increased the capital gains tax (CGT) on foreign investors trading in its equities market from 10 percent to 30 percent, a policy shift expected to reshape participation dynamics in one of Africa’s top-performing stock markets.
The new tax rate, effective January 2026, is part of the Federal Government’s revised tax law under President Bola Tinubu’s economic reform agenda, which aims to strengthen fiscal discipline, boost non-oil revenue and reduce budget deficits.
Under the new framework, foreign equity investors will be required to pay a 30 percent tax on gains from the sale of Nigerian shares unless they reinvest the proceeds in other listed or unlisted domestic equities.
The move marks a significant increase from the previous 10 percent rate, which was not widely enforced in practice.
According to analysts, the decision could temporarily weigh on market sentiment as both foreign and domestic institutional investors look to realize gains under the current tax regime before the higher rate takes effect.
“A higher cost of equity means that Nigerian businesses will have to make higher sustainable returns to attract foreign capital,” said Kato Mukuru, founding partner at Emerging & Frontier Capital LLP. “It will put a lot of pressure on the stock market until the end of the year, as domestic and foreign institutional investors look to realize gains under the current tax regime.”
Despite potential short-term volatility, Nigeria’s stock market remains one of the best-performing globally in 2025, with year-to-date returns of 39 percent in naira terms and 47 percent in US dollar terms, according to Bloomberg data.
The rally has been driven by renewed investor confidence following President Tinubu’s structural reforms, which include the removal of fuel subsidies, foreign exchange unification, and empowerment of the Central Bank to pursue orthodox monetary policies under Governor Olayemi Cardoso.
Chairman of the Presidential Tax Reforms Committee, Taiwo Oyedele, defended the new measure, saying the change was designed to make the tax system more equitable and to encourage capital retention within the domestic economy.
“We are challenging them to show us how it makes them worse off,” Oyedele said. “The country you pay capital gains tax is where you earn it from. When you now go to your home country, they credit you. We know they are not worse off; they just want the better end of everything.”
Official data from the Nigerian Exchange Group (NGX) shows that foreign investors accounted for 21 percent of total market transactions in the first eight months of the year, with trades valued at ₦1.45 trillion ($989 million).
However, tax experts warn that the new rule could deter some investors depending on bilateral tax agreements.
“Foreign investors can only get credit for the amount paid in Nigeria if there is a double taxation agreement between Nigeria and their country, and if it gives Nigeria a right to tax disposals of shares,” said Russell Eastaugh, Africa tax lead at South Africa-based consultancy Regan van Rooy. “There is a significant risk that investors will now find investing in the stock market less attractive.”
The policy forms part of Nigeria’s broader effort to rebuild fiscal stability through enhanced revenue mobilisation. While the move aligns with international tax reforms designed to capture offshore gains, analysts caution that its timing — amid strong market momentum — may create short-term capital outflows as investors adjust portfolios before implementation.
Nonetheless, government officials maintain that the reform will promote fair taxation, reduce speculative trading, and encourage long-term reinvestment in the Nigerian economy.
