Online Reporter
Nigeria is tripling capital gains tax for foreign equity investors, raising concerns that the move may trigger a sell-off in the West African nation’s stock market, which is up almost 40 percent this year. Foreigners will face 30 percent CGT on the sale of Nigerian shares from January unless the proceeds are reinvested in other listed or unlisted domestic equities. The change is part of a new tax law and lifts CGT on foreigners from a current rate of 10 percent, which is not widely implemented.
“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 realise gains under the current tax regime.”
The Nigerian equity market is one of the top 10 best performers globally this year among those tracked by Bloomberg, offering investors 39 percent in local currency returns and 47 percent in US dollars.
The nation’s assets have rallied strongly, buoyed by economic reforms implemented by President Bola Tinubu since he took office in 2023.
He has phased out costly energy subsidies, allowed the currency to float more freely and empowered the central bank to pursue orthodox monetary policy under the leadership of Governor Olayemi Cardoso. The overhaul of the tax code is also part of the reform agenda and aims to boost revenue and cut the budget deficit.
Taiwo Oyedele, chairman of Nigeria’s presidential tax reforms committee that introduced the higher capital gains tax, dismissed complaints that it hurts foreign investors and argued that they can reclaim tax credits in their home countries.
“We are challenging them to show us how it makes them worse off,” Oyedele said, referring to the new law. “We know they are not worse off, they just want the better end of everything,” he said, adding: “The country you pay the capital gain tax is where you earn it from, when you now go to your home country, they credit you.” — Bloomberg
