The New Capital Gains Tax In Nigeria: Key Considerations For Foreign Investors

Introduction

Globally, jurisdictions such as Mauritius, Singapore, and the United Arab Emirates have built reputations as investor friendly hubs by maintaining transparent, predictable, and business-friendly tax systems. These environments offer clarity, reduce uncertainty, and provide incentives that make capital deployment more efficient.

Nigeria's recent tax reforms, particularly the changes to the Capital Gains Tax (CGT) regime have been positioned as a step towards a fairer and more integrated tax framework that supports reinvestment.

Understanding Capital Gains Tax Reforms

CGT is a tax charged on the profit made from the sale of a chargeable asset, such as shares, real estate, or other investments.

CGT in Nigeria is currently charged at a flat rate of 10% on all chargeable assets, regardless of the taxpayer's income level.

Under the new system, which takes effect from 1 January 2026:

• CGT will now be a progressive tax, tied to a taxpayer's income tax rate
• The applicable rate will range from 0% – 30%, depending on total income or profit.
• Individuals who earn N800,000 or less annually will be exempt from tax on their income and gains.

Key Reliefs of the New CGT Regime

The reform also provides for reliefs that make it more balanced and investment friendly:

• Exemption thresholds – Individuals whose annual proceeds from asset sales do not exceed ₦150 million, where the gains are under ₦10 million, will be exempt.
• Institutional investors – Pension funds and other institutional investors remain exempt as well, preserving the depth and stability of the long-term investment capital in the market.
• Reinvestment relief – Investors who reinvest proceeds from the sale of shares into Nigerian companies will not be subject to CGT on those gains.
• Company restructuring – Companies undergoing reorganization, mergers, or restructurings will be exempt from CGT on those transactions.

These measures are designed to deepen the domestic capital market and encourage reinvestment rather than capital flight. They also protect small investors while ensuring that the system remains progressive and consistent with international best practice.

What This Means for Foreign Investors

For foreign investors, the reform presents both opportunities and adjustments. By linking CGT to income tax rates, Nigeria now offers a more transparent and globally familiar tax structure. The exemptions for reinvested proceeds may create an incentive for capital retention and local market participation. For long-term or strategic investors, this may present opportunities to optimise post-tax returns through reinvestment in productive sectors.

Foreign investors from countries that have double taxation agreements (DTAs) with Nigeria, such as the United Kingdom and the Netherlands, will generally be able to claim tax credits for CGT paid in Nigeria, thereby avoiding double taxation. However, investors from jurisdictions without DTAs may not enjoy the same reliefs and could face higher tax costs.

From a practical standpoint, investors may need to review reinvestment options to take advantage of exemptions. While long-term investors may benefit from reinvestment incentives, short-term or speculative investors may face higher CGT liabilities under the new system.

Conclusion

Nigeria's capital gains tax reform represents a shift towards a more modern and integrated tax framework that seeks to retain capital locally and reinforce the domestic market. However, predictable foreign exchange policies, regulatory efficiency, and ease of repatriation remain critical for sustaining investor confidence.

For foreign investors, understanding these changes and aligning investment strategies accordingly will be key to maximising investment opportunities in Nigeria. Foreign and domestic investors alike are therefore advised to seek professional tax guidance to understand how the new rules affect their specific structures and transactions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.