The Chairman of the Presidential Fiscal Coverage and Tax Reforms Committee, Taiwo Oyedele, has clarified that Nigeria’s new Capital Positive factors Tax (CGT) framework won’t retroactively tax funding good points made earlier than 2026.
That is in accordance with an announcement launched by the committee detailing key provisions of the CGT reform set to take impact from January 1, 2026, underneath the proposed Nigeria Tax Act 2025.
On the coronary heart of the clarification is a price foundation reset and a grandfathering clause designed to protect outdated good points whereas making use of tax solely to new earnings made after the reform takes impact.
His assertion comes at a important time for the capital market, which has recorded steep declines in latest days.
The Nigerian Change misplaced a staggering N6.3 trillion in market worth over simply seven buying and selling periods, together with a N4.7 trillion plunge in a single day.
In accordance with market analysts and buyers who spoke with Nairametrics, uncertainty over the CGT reform has been a serious set off for the widespread sell-offs, as many feared they’d be taxed on unrealised or historic good points.
Clarification about price foundation
In accordance with the committee’s assertion, the CGT reform introduces a major change in how the tax will probably be calculated for investments made earlier than 2026.
Particularly, the associated fee base or reference worth for calculating capital good points will probably be reset to the upper of two quantities: the precise quantity paid to accumulate the asset or the asset’s market worth as of December 31, 2025.
“For the aim of CGT efficient from 1 January 2026, the associated fee base for present investments will probably be reset to the upper of:
a) the precise acquisition price; and
b) the closing market worth as at 31 December 2025.
This ensures equity and prevents the applying of the brand new rule to good points accrued earlier than the brand new regulation takes impact.” – Taiwo Oyedele
This implies buyers who purchased shares at a lower cost in earlier years and noticed their worth rise won’t be taxed on these historic good points. As a substitute, taxation will solely apply to any appreciation in worth that happens after 2025.
For instance, if an investor acquired shares at N5 and the worth appreciates to N20 by December 31, 2025, the tax authority will deal with N20 as the associated fee base going ahead.
If the shares are later bought in 2026 for N25, solely the N5 acquire realised after the reset date will probably be topic to CGT. The N15 acquire earned earlier than the brand new regulation takes impact won’t be taxed.
This mechanism is meant to guard long-term buyers from being penalised for holding property over time and reward affected person capital with out imposing a tax burden on previous development.
What “grandfathering” means in easy phrases
Along with resetting the associated fee base, the CGT reform features a grandfathering provision for previous good points. Merely put, grandfathering implies that any good points made as much as December 31, 2025, will probably be exempt from the brand new capital good points tax regime.
“Transition preparations – good points earned on shares as much as 31 December 2025 will probably be grandfathered and solely taxed upon disposal the place relevant, primarily based on the regulation as at that date.” Taiwo Oyedele
Think about an investor who purchased shares at N10 in 2020, which then appreciated to N50 by the top of 2025. If the investor sells these shares in 2026 for N60, the N40 acquire accrued earlier than 2026 is grandfathered and never topic to tax.
- Solely the N10 acquire from 2026 onward will probably be taxed—offered the investor doesn’t reinvest or qualify for an additional exemption.
- This provision gives readability and certainty to buyers involved that the reform would outcome within the retroactive taxation of earnings already earned.
- For buyers, the important thing message is that previous good points are protected. The brand new CGT regime gives a clear slate beginning in 2026 by establishing a brand new market-based price base.
Solely the good points made out of that time ahead will probably be topic to tax, making the system each equitable and aligned with international requirements.
Why this issues
Investor confidence within the capital markets is extremely delicate to tax coverage adjustments, and fears of retrospective taxation might have triggered market volatility.
- The price foundation reset and grandfathering provisions successfully deal with these issues by making certain that solely future good points are taxed, whereas historic earnings stay untouched.
- The clarification is especially essential now, given the present bearish sentiment within the Nigerian capital market.
- In lower than two weeks, the NGX has shed trillions in worth, with buyers exiting their positions in droves—many citing ambiguity across the CGT reform.
This well timed intervention from Oyedele and his committee seems to be geared toward calming nerves and reassuring the market that the reforms are designed to be honest, clear, and non-retroactive.
What you must know
Along with the associated fee reset and grandfathering, the broader CGT reform introduces a number of investor-friendly adjustments supposed to modernise Nigeria’s tax system:
- The brand new progressive tax construction will substitute the present flat 10% price, with charges starting from 0% to 30% relying on revenue or revenue thresholds.
- Small and institutional buyers, resembling pension funds, Actual Property Funding Trusts (REITs), and registered NGOs, will stay exempt.
- Traders will now be allowed to deduct losses, brokerage charges, curiosity on margin loans, and statutory transaction expenses in calculating their web good points.
- A reinvestment aid clause will exempt buyers from CGT if proceeds are reinvested in Nigerian shares inside 12 months of the unique disposal.
The total implementation tips for the reform are anticipated earlier than the January 1, 2026, rollout.
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