Economists have warned that the Federal Government’s decision to raise Capital Gains Tax to 30 per cent may discourage foreign investors and dampen activities in the Nigerian equity market.

Nigeria’s new tax laws, set to take effect on January 1, 2026, represent a significant overhaul of the country’s fiscal framework. These reforms, embodied in several new acts, including the Nigeria Tax Act, the Nigeria Tax Administration Act, and the Nigeria Revenue Service Act, are designed to streamline the tax system, broaden the tax base, and promote economic growth and the outlook of the nation.

For companies, the Capital Gain Tax rate is increased from 10 per cent to 30 per cent, aligning it with the Companies Income Tax rate. For individuals, capital gains will now be taxed at the applicable progressive income tax rate based on their income band.

Speaking with The PUNCH on Monday, the Chief Executive of Cowry Treasurers Limited, Charles Sanni, said the policy could reduce investors’ profit margins and make the Nigerian market less attractive compared to other emerging markets.

According to him, the new tax regime directly impacts the returns investors take home, a development that could trigger a decline in market participation.

“The first thing to note is that the capital gains tax directly affects the returns investors take home. When you introduce a higher capital gains tax, you’re essentially reducing the earnings investors make from their investments. That automatically impacts their profit margins and makes the Nigerian market less attractive,” Sanni said.

He explained that although Nigeria’s macroeconomic fundamentals were gradually improving, the tax hike could still lead to a pullback in investor interest, especially in the equity market.

“We are likely to see a pullback in investor interest in the Nigerian equity market, even though the macroeconomic fundamentals are gradually improving. Remember, Nigeria often sets the tone for other African markets, so if we implement this, other countries might follow suit,” he added.

Sanni further warned that the move could have ripple effects on the nation’s economy, affecting foreign reserves, demand for Nigerian equities, and the cost of capital for listed firms.

“The immediate effect will be a drop in investor appetite, especially among foreign investors. This could affect our foreign reserves, reduce demand for Nigerian equities, and increase the cost of capital for listed companies. We could also experience a decline in capital inflows,” he said.

He, however, noted that the government’s decision was largely driven by the need to boost revenue.

“It’s important to understand that this isn’t a company income tax; it’s a capital gains tax. The government is simply seeking ways to increase its revenue. Two things can happen: if the macroeconomic fundamentals remain strong, it could still attract foreign investors; but if the policy is not well managed or the additional revenue isn’t used productively, it could worsen the investment climate,” Sanni explained.

Also speaking to The PUNCH, the former Director of the Central Bank of Nigeria and the West African Institute for Financial and Economic Management, Akpan Ekpo, described the tax rate as high but acknowledged that it was aimed at improving government revenue from wealthy individuals and large investors.

“To be honest, the new tax rate is quite high, and it will likely discourage some foreign investors. But I understand that the government’s intention is to raise revenue, especially from those who are wealthy and capable of paying more,” Ekpo said.

He added that while projections suggest the policy could generate up to N1tn in revenue, its success would depend on proper management and the productive use of funds.

“There are projections that this policy could generate as much as N1tn in revenue; maybe it will, maybe it won’t, but it’s good that the government is thinking big. My only concern is that such policies should not be implemented at the expense of others,” he noted.

Ekpo maintained that expanding the tax base was a welcome idea if the proceeds were channelled into critical sectors like health, education, and housing.

“That said, I don’t see anything wrong with expanding the tax base. Every country is working toward a more progressive tax system where those who earn more contribute more. In this case, middle-income earners and small investors are not really affected; it targets the wealthy.

“My hope, however, is that the revenue generated from this increase is properly utilised to improve the quality of healthcare, education, and housing. If the money is well managed and directed toward development, then the impact could be positive for the wider economy,” he said.