The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, has clarified that Nigeria’s new Capital Gains Tax (CGT) framework will not retroactively tax investment gains made before 2026.
This is according to a statement released by the committee detailing key provisions of the CGT reform set to take effect from January 1, 2026, under the proposed Nigeria Tax Act 2025.
At the heart of the clarification is a cost basis reset and a grandfathering clause designed to preserve old gains while applying tax only to new profits made after the reform takes effect.
His statement comes at a critical time for the capital market, which has recorded steep declines in recent days.
The Nigerian Exchange lost a staggering N6.3 trillion in market value over just seven trading sessions, including a N4.7 trillion plunge in a single day.
According to market analysts and investors who spoke with Nairametrics, uncertainty over the CGT reform has been a major trigger for the widespread sell-offs, as many feared they would be taxed on unrealised or historical gains.
Clarification about cost basis
According to the committee’s statement, the CGT reform introduces a significant change in how the tax will be calculated for investments made before 2026.
Specifically, the cost base or reference price for calculating capital gains will be reset to the higher of two amounts: the actual amount paid to acquire the asset or the asset’s market value as of December 31, 2025.
“For the purpose of CGT effective from 1 January 2026, the cost base for existing investments will be reset to the higher of:
a) the actual acquisition cost; and
b) the closing market price as at 31 December 2025.
This ensures fairness and prevents the application of the new rule to gains accrued before the new law takes effect.” – Taiwo Oyedele
This means investors who bought shares at a lower price in previous years and saw their value rise will not be taxed on those historical gains. Instead, taxation will only apply to any appreciation in value that occurs after 2025.
For example, if an investor acquired shares at N5 and the value appreciates to N20 by December 31, 2025, the tax authority will treat N20 as the cost base going forward.
If the shares are later sold in 2026 for N25, only the N5 gain realised after the reset date will be subject to CGT. The N15 gain earned before the new law takes effect will not be taxed.
This mechanism is intended to protect long-term investors from being penalised for holding assets over time and reward patient capital without imposing a tax burden on past growth.
What “grandfathering” means in simple terms
In addition to resetting the cost base, the CGT reform includes a grandfathering provision for past gains. Simply put, grandfathering means that any gains made up to December 31, 2025, will be exempt from the new capital gains tax regime.
“Transition arrangements – gains earned on shares up to 31 December 2025 will be grandfathered and only taxed upon disposal where applicable, based on the law as at that date.” Taiwo Oyedele
Consider an investor who bought shares at N10 in 2020, which then appreciated to N50 by the end of 2025. If the investor sells those shares in 2026 for N60, the N40 gain accrued before 2026 is grandfathered and not subject to tax.
- Only the N10 gain from 2026 onward will be taxed—provided the investor does not reinvest or qualify for another exemption.
- This provision offers clarity and certainty to investors concerned that the reform would result in the retroactive taxation of profits already earned.
- For investors, the key message is that past gains are safe. The new CGT regime offers a clean slate starting in 2026 by establishing a new market-based cost base.
Only the gains made from that point forward will be subject to tax, making the system both equitable and aligned with global standards.
Why this matters
Investor confidence in the capital markets is highly sensitive to tax policy changes, and fears of retrospective taxation could have triggered market volatility.
- The cost basis reset and grandfathering provisions effectively address these concerns by ensuring that only future gains are taxed, while historical profits remain untouched.
- The clarification is particularly important now, given the current bearish sentiment in the Nigerian capital market.
- In less than two weeks, the NGX has shed trillions in value, with investors exiting their positions in droves—many citing ambiguity around the CGT reform.
This timely intervention from Oyedele and his committee appears to be aimed at calming nerves and reassuring the market that the reforms are designed to be fair, transparent, and non-retroactive.
What you should know
In addition to the cost reset and grandfathering, the broader CGT reform introduces several investor-friendly changes intended to modernise Nigeria’s tax system:
- The new progressive tax structure will replace the current flat 10% rate, with rates ranging from 0% to 30% depending on income or profit thresholds.
- Small and institutional investors, such as pension funds, Real Estate Investment Trusts (REITs), and registered NGOs, will remain exempt.
- Investors will now be allowed to deduct losses, brokerage fees, interest on margin loans, and statutory transaction charges in calculating their net gains.
- A reinvestment relief clause will exempt investors from CGT if proceeds are reinvested in Nigerian shares within 12 months of the original disposal.
The full implementation guidelines for the reform are expected before the January 1, 2026, rollout.