In a sweeping structural reform, Nigeria has effectively abolished its standalone 10% Capital Gains Tax (CGT) and integrated the gains into its new income tax regime, a move that has triggered widespread debate over its potential to stifle investment or modernize tax fairness.
Under the newly signed Nigeria Tax Act, 2025, capital gains for individuals will now be taxed under personal income tax progressive bands (0% to 25%), while corporate entities and large investors will see CGT rates rise to align with corporate tax (30%) effective from 1 January 2026.
This reform is part of a broader ambition by the Tinubu-led administration to rationalize overlapping taxes, modernize Nigeria’s revenue architecture, and increase the tax-to-GDP ratio, which currently hovers around 10%.
Capital Gains Tax (CGT) is simply the tax paid when one makes a profit from selling something valuable, like land, houses, or company shares.
Let’s say you bought a piece of land for ₦5 million and later sold it for ₦8 million. The ₦3 million profit made is called a capital gain, and that’s what the government used to tax at 10%.
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But under Nigeria’s new tax law (2025), this separate 10% tax has been scrapped. Now, any profit you make from selling assets will be added to your normal income and taxed together.
Speaking at the just-concluded World Bank and IMF Annual Meetings in Washington, D.C., Dr. Uzoka-Anite revealed that international investors are showing renewed confidence in Nigeria’s economy, noting that the administration’s reform agenda is designed to strike a balance between fairness and fiscal responsibility.
“Our reforms are not about punishment; they are about balance, transparency, and restoring fiscal stability,” Uzoka-Anite stated.
But as Nigeria reconfigures its tax regime, analysts warn that a wrong fiscal move could lead to capital flight, especially to peer African economies that maintain more favorable CGT regimes.
In this report, Pinnacle Daily compares Nigeria’s new regime with those of South Africa and Kenya, weighs the pros and cons, and explores whether Nigeria has misjudged the balance between revenue drive and investment climate.
What Changed in Nigeria: A CGT Reset
From Flat CGT to Integrated Income Tax
- Under the old regime, capital gains were taxed at a flat rate of 10%, via a separate CGT law.
- With the 2025 reforms, the 10% CGT is abolished (“scrapped”) and the gains are merged into the tax base for personal or corporate income tax.
- For individuals, gains will now be taxed at progressive personal income tax rates (0% up to 25%) depending on one’s total taxable income.
- For companies / large investors, capital gains will now face a 30 % rate, aligning with the general corporate income tax rate.
Other Key Changes & Broadening of Scope
- Indirect share transfers (sales of offshore entities deriving value from Nigerian assets) are now explicitly taxable under CGT.
- Small companies meeting certain turnover and asset thresholds may be exempt from CGT (and corporate income tax) under the new regime.
- Loss offset rules have been harmonized: capital losses can be deducted against gains in other assets or income, improving symmetry.
- Exemptions remain for “low-value chattels,” primary residences (subject to conditions), two personal vehicles, and the like.
South Africa & Kenya: Peer Benchmarks and Lessons
South Africa: Inclusion and Marginal Rates
- South Africa does not maintain a separate flat CGT rate. Instead, portions of gains are “included” in taxable income under income tax. For individuals, 40% of net capital gains are included; for companies and trusts, 80%.
- After inclusion, the effective tax burden on capital gains depends on the taxpayer’s marginal tax rate. The maximum effective CGT rate is around 18% for individuals (in the highest income bracket) and 22.4% for companies.
- South Africa grants various exemptions:• R 40,000 annual exclusion on net capital gains for individuals.• R 2 million gain exclusion for primary residences (under qualifying conditions).• Once-off exclusion on death, exclusions for small business disposals.
- Losses: net capital losses cannot be deducted against ordinary income but can be carried forward to offset future capital gains.
South Africa’s model balances investor incentives (via exemptions and inclusion rates) while integrating gains into the ordinary tax system, creating flexibility and predictability.
For comparison, South Africa provides far more generous relief to taxpayers. Individuals there enjoy a ₦3.44 million (R40,000) annual exclusion on net capital gains, while profits from the sale of a primary residence attract a ₦172 million (R2 million) exemption under qualifying conditions. (Exchange rate: R1 = ₦86, as of October 2025.)
These allowances cushion ordinary taxpayers and encourage long-term investment, a structure experts believe Nigeria could study as it transitions to its new unified income tax model.
Kenya: Final Flat Rate — But Higher
- Kenya reintroduced CGT in 2015 at a 5% flat rate for gains on property, shares, etc.
- However, via the Finance Act 2022, the rate was increased to 15%, effective 1 January 2023, applying as a final tax (not further taxed or aggregated).
- Kenya’s CGT is only on net gains: sale proceeds less acquisition cost and incidental costs.
- The tax is final; it cannot be offset or aggregated.
- Kenya also applies CGT to non-residents who dispose of assets tied to Kenya (property, shares) under certain conditions.
Kenya’s approach is simple and straightforward, a flat rate final tax, but the jump from 5% to 15% is significant and has drawn commentary about its impact on real estate and capital market activity.
Nigeria vs South Africa vs Kenya: Comparative Matrix
| Jurisdiction | CGT Structure | Rate or Inclusion Mechanism | Exemptions / Reliefs | Loss Treatment | Investor Impact |
|---|---|---|---|---|---|
| Nigeria (new) | Gains integrated into income tax (no separate CGT) | Individuals: progressive up to 25%; Corporations/large: 30% | Small companies may be exempt; low-value chattels, residence, vehicles | Losses deductible / offset across gains / income | Higher burden for large investors; risk of capital flight |
| South Africa | Portion of gains included in taxable income | Individuals: 40 % inclusion (effective ~18%); Companies/Trusts: 80% inclusion (effective ~22.4%) | Annual exclusion, primary residence, small business disposal, death, etc. | Capital losses carried forward to offset future gains | Balanced incentive system; relatively stable environment |
| Kenya | Flat final CGT on net gains | 15 % (since 2023) | None very elaborate; limited exemptions | No offset against ordinary income; losses cannot be carried forward (or only against gains) | Simplicity favored; some concern about higher rates |
Voices From Experts: Support, Concern & Critique
Sidiku Olayinka Oscar, Investment Banker, Policy Expert, speaking exclusively to Pinnacle Daily, warns that the jump from 10 % to as high as 30 % for corporations and high-income individuals could discourage investment inflows.
He observes that the increased tax burden shrinks after-tax returns on asset sales, which may deter investors from realizing gains or exiting positions. He suggests Nigeria risks losing ground to jurisdictions with lower CGT burdens ( Kenya’s 15 % or South Africa’s effective 18 %). In his view, a more moderate band (10–15 %) might have struck a better balance.
Kehinde Kajesomo, Deputy Director, Competent Authority, Federal Inland Revenue Service (FIRS) emphasizes that integrating CGT into income tax helps simplify the tax regime, eliminate arbitrage between gains and ordinary income, and harmonize tax laws.
He acknowledges the trade-offs, particularly for small businesses, but argues the system allows losses to offset gains and promotes fairness in taxing all forms of income holistically.
Addressing the issue of state compliance in Nigeria’s ongoing tax reform, from January 2026, Kehinde Kajesomo explained that although the Federal Government, through the National Assembly, holds the constitutional authority to impose taxes such as the Personal Income Tax under the Exclusive Legislative List, the responsibility for collecting these taxes lies squarely with the states under the Concurrent List.
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He clarified that this constitutional arrangement limits the Federal Government’s power to enforce compliance, as each state has the legal autonomy to manage its own tax collection process. Using Lagos State as an example, Kajesomo noted that while some states are efficient and proactive in collecting taxes, others depend heavily on federal allocations and often neglect their internal revenue systems.
This, he said, creates a sense of unfairness among taxpayers in compliant states, who fulfill their obligations while others do not.
Kajesomo added that to bridge this gap, the law provides a mechanism for states that lack the technical capacity to collect taxes effectively.
Under Section 5 of the Nigerian Revenue Service Establishment Act, such states can formally request the Federal Inland Revenue Service (FIRS) to assist in collecting and remitting taxes directly into their state accounts.
He emphasized that this measure does not affect the Federation Account but is designed to enhance compliance, promote accountability, and ensure fiscal balance across all states in the federation.
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Risks & Opportunities — What This Means for Nigeria
- Capital flight and investor deterrence: If Nigeria becomes tax-unfriendly relative to regional peers, capital may shift to Kenya, South Africa, or other jurisdictions.
- Lower liquidity in capital markets: Higher exit taxes reduce the incentive to trade or divest assets, which may suppress stock market turnover and dampen secondary market growth.
- Disproportionate impact on foreign investors: Foreign portfolio and venture capital investors may balk at higher CGT on indirect exit routes, potentially reducing foreign direct and portfolio inflows.
- Structural uncertainty & compliance burden: Transitioning to a new regime introduces ambiguity, compliance costs, valuation disputes, and tax controversies during the early years.
- Equity capital raising challenge: With higher taxation on exits, companies may find it harder to attract private capital, especially in growth or scaling stages.
Opportunities / Potential Upsides
- Revenue mobilization: The reform helps broaden the base and plug tax leakages ( indirect transfers), improving fiscal sustainability.
- Harmonization & fairnessAligning gains and income under one tax framework simplifies administration and reduces arbitrage.
- Predictability and clarityOnce stabilized, a unified regime may reduce disputes about what constitutes “gain vs. income.”
- Encourages long-term holding. A higher exit tax might incentivize investors to hold assets longer, improving investment stability.
Strategic Considerations According to Olayinka
Sidiku Olayinka, an expert in the field, advocates for a careful, phased approach in transitioning to a new tax regime to protect both existing and future investments. A crucial suggestion is the introduction of a transitional or grandfathering mechanism that would allow legacy capital gains tax (CGT) treatment to continue for existing investments.
This approach, he argues would help mitigate the shock of sudden changes and provide a smoother adjustment for investors who are already involved in the market.
In addition, Olayinka proposes the adoption of a graduated or tiered exit tax system instead of a flat 30%. He recommends creating a tax structure with rates such as 10%, 20%, and 30%, which would vary based on the holding period of the investment or the investor’s type, such as distinguishing between domestic and foreign investors.
he said this system would allow for more flexibility and fairness in the taxation process, benefiting long-term investors and domestic market players.
To further protect investors, especially smaller ones, Olayinka emphasizes the importance of strengthening exemptions and reliefs.
He suggests implementing carve-outs, thresholds, or reliefs for small investors, startups, and micro, small, and medium-sized enterprises (MSMEs). Drawing inspiration from South Africa’s exclusion allowances, such provisions would ensure that these groups are not disproportionately affected by CGT policies, fostering a more inclusive economic environment.
Finally, Olayinka highlights the need for transparency and clarity in valuation rules and tax dispute resolution. He stresses the importance of providing clear guidelines for asset valuations, establishing independent appraisal frameworks, and creating efficient mechanisms for resolving tax disputes.
Additionally, he advises periodic benchmarking against peer jurisdictions like Kenya and South Africa to ensure that Nigeria’s CGT framework remains competitive. To complement these efforts, investor education and engagement are crucial, with roadshows being conducted to inform investors about the new arrangements and gather feedback for further refinement.
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Nigeria’s CGT overhaul is undoubtedly bold. It addresses long-standing fragmentation and attempts to harmonize capital taxation with income. But timing and design matter enormously.
While South Africa’s inclusion-based regime and Kenya’s flat final tax provide useful comparators, Nigeria’s leap to 30 % (for corporates) may test investor confidence.
The balance between raising revenue and sustaining investment momentum is delicate. In the early years, execution clarity and responsiveness to market feedback will be as important as the headline rates themselves.
As implementation begins in January 2026, Nigeria faces a delicate balancing act. The reform must appear firm yet fair, assertive enough to improve compliance but flexible enough to attract and retain investors. In the end, clarity, consistency, and communication will matter just as much as the tax rate itself.
Esther Ososanya is an investigative journalist with Pinnacle Daily, reporting across health, business, environment, metro, Fct and crime. Known for her bold, empathetic storytelling, she uncovers hidden truths, challenges broken systems, and gives voice to overlooked Nigerians. Her work drives national conversations and demands accountability one powerful story at a time.
