How Nigeria’s corporates can plot their escape from 30% CGT
The announcement of the new 30 percent capital gains tax (CGT) under the Nigerian Tax Act (2025) has sparked reactions across the Nigerian corporate landscape.
Under the new CGT guidelines, certain thresholds have been introduced. For instance, there is a N150 million threshold on the sale of shares in Nigerian companies. Put simply, if the total sale amount in a year is below N150 million, and the total gains from asset sales are less than N10 million, the company is exempt.
While most analysts have focused on the impact of the new CGT on foreign portfolio investors in the NGX, the implications extend beyond the stock market.
According to Section 34 of the Act, all forms of assets are covered by the CGT. These include land, buildings, equipment, shares or company stock, stock options and rights, debts, digital or virtual assets (such as cryptocurrencies), and other intangible or non-physical assets, including intellectual property.
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Even assets in the oil sector are not exempt. In one report, Andersen in Nigeria, tax and business advisory firm, outlined the potential implications of the CGT on upstream oil deals.
The new tax regime, which will take effect on January 1, 2026, comes roughly a year after about $5 billion worth of upstream asset transfers occurred in Nigeria. Essentially, if the new CGT had applied when those deals were being negotiated, it would have significantly affected deal sizes and might have hindered some transactions.
In response to the announcement, investors have been weighing the news carefully. Some have questioned the rationale behind the new tax. Meanwhile, various advisories on how to navigate the regime have started circulating.
Speaking on some of the potential consequences, Ayodeji Ebo, chief business officer of Optimus by Afrinvest, noted that the tax means investors will now have to earn higher profits to maintain their returns.
“So, if someone earns more than N10 million in profit, they’ll have to pay 30 percent. That’s N3 million to the government, leaving a net profit of N7 million. Investors at this level will now have to generate higher profits to maintain their returns,” he explained.
Speaking to BusinessDay TV, Ebo noted that companies would have to be smarter with their tax planning. He highlighted one strategy companies could adopt under the new law: accounting for capital gains as profit.
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Accounting for capital gains as profit
According to the Nigeria Tax Act 2025, the Company Income Tax (CIT) is set at 30 percent, the same rate as CGT. This means that profits earned from the sale of assets, shares, or other related investments can be accounted for as part of a company’s operating profit.
Previously, with CGT at 10 percent and CIT at 30 percent, corporates were intentional about separating capital gains from profits. Now, there is a higher likelihood that companies will include inflows from asset sales in their profit and loss statements. In years when a company posts a loss, it could avoid paying CGT altogether.
Selling off underperforming assets
Ebo also suggested that investors may adopt more strategic portfolio management practices. One approach could be selling off underperforming assets to reduce tax liability.
He explained: “For instance, if I review my portfolio within a year and realise that I’ve reached the N150 million threshold, and will therefore owe CGT, I could sell some loss-making or underperforming shares. The losses from those sales would offset gains on other assets, effectively lowering my overall taxable profit.”
He highlighted the additional incentive for reinvestment. Under current provisions, gains reinvested in other qualifying securities within the same period are exempt from the CGT. This allows investors to legally defer or avoid paying tax on those reinvested amounts.
Another potential strategy, Ebo said, is for investors to step back from the equities market entirely. The calculus is even more complicated for foreign investors, many of whom face the risk of double taxation.
“An investor who earns $1 million in capital gains from Nigerian stocks could lose about $300,000 to the proposed 30 percent CGT. If that investor must also pay taxes on the same income in their home country, the effective return shrinks further,” he noted.
In this situation, the incentive to remain in the market weakens. “Even with a 20 percent gain on equities, a 30 percent tax reduces the net return to roughly 14 percent,” Ebo explained. Fixed-income instruments yielding between 14 and 15 percent, and carrying far less volatility, become comparatively more attractive.
Read also: New Capital Gains Tax regime: Here’s how it affects you
Staggered transactions
Away from the capital market, Andersen highlighted strategies for upstream players. One approach is staggering transactions. Instead of disposing of assets in a single sale, companies may break sales into smaller tranches or structure deals with earn-out mechanisms.
Staggered arrangements not only ease the financing burden for buyers but also spread the recognition of gains. This mitigates the immediate cash flow from the tax increase.
Andersen also suggested that firms weigh the merits of share sales versus asset sales. Instead of acquiring assets, companies may choose to acquire the company itself. This approach was used in Seplat’s acquisition of Mobil Producing Unit Nigeria (MPNU) and Renaissance’s acquisition of Shell Petroleum Development Company (SPDC).
In the case of share sales, Andersen noted that the seller’s location has become a key consideration. Companies can explore offshore holding structures to facilitate disposals. This allows them to leverage jurisdictions with favourable double taxation agreements (DTAs), limiting Nigeria’s taxing rights and, in some cases, reducing or even eliminating CGT exposure.
