As global capital remains wary of emerging markets, Nigeria faces a critical choice: secure a marginal tax revenue today or risk essential dollar inflows needed for economic stability and growth.
Under the Nigeria Tax Act of 2025, Capital Gains Tax (CGT) has been raised to 30 percent from 10 percent, effective January 1, 2026.
Ahead of this implementation date, Nigeria’s private equity firms say that the 30 percent Capital Gains Tax (CGT) will moderate capital inflows into Africa’s most populous nation.
The PE firms’ core argument hinges on the impact of the naira’s devaluation between entry and exit.
For instance, a foreign PE investor injects $1 million, which converts to N400 million at an exchange rate of say N400/$.The PE investor successfully grows the company and sells the stake for N600 million, realising a nominal Naira gain of N200 million.
Read also: Private Equity firms get CGT relief on Startups as other exits remain taxable
However, if the investor seeks to repatriate their funds when the exchange rate has weakened to $1,440/$, their N600 million exit proceeds convert to just $416,667.
In real economic terms, the firm suffered a loss of $583,333. Despite this substantial dollar loss, the FIRS still demands 30 percent of the nominal N200 million gain, equating to a tax of N60 million, which further eats into the remaining dollar principal.
“It will impact our returns because the CGT is on naira gains. For us, USD investors, a deal might be unprofitable in dollar terms but could still be taxed because the government is only looking at naira gains. You cannot want to drive capital inflows and put bottlenecks on it,” Tunji Shekoni, principal at Cardinalstone Capital Advisers.
Foreign Direct Investment (FDI) into Nigeria fell sharply by 70.06 percent in the first quarter of 2025, dropping to $126.29m from $421.88m in the previous quarter, according to new data from the National Bureau of Statistics (NBS). Equity investment, the largest component of FDI, fell 70.36 percent to $124.31 million.
Private Equity firms are investment managers that raise capital from institutional and accredited investors (like pension funds, endowments, and high-net-worth individuals) to acquire ownership stakes in private companies or take publicly-traded companies private. Nigeria’s private equity and venture capital market has deployed about $3 billion across 404 deals from 2019 to 2025.
Unlike other African hubs, Nigeria’s policy currently does not offer relief for gains eroded by currency depreciation or inflation. While South Africa and Kenya may also not offer formal currency indexation, their lower tax rates and robust Double Tax Treaties significantly mitigate the punitive effect Nigeria’s high 30% rate imposes on dollar losses.
Last week, the Private Equity & Venture Capital Association (PEVCA) and the African Private Capital Association (AVCA) explored the changes to the 2025 Tax Act, including updates on withholding and capital gains taxes, offshore share transfers, and fund exit planning. Participants emphasised the need for clear guidance, practical case-based support, and ongoing dialogue between industry, advisers, and regulators.
Read also: Nigeria likely to review Capital Gains Tax, Edun says
Taiwo Oyedele, chairman, Presidential Committee on Fiscal Policy and Tax Reforms, has said that private equity firms that invest in certain sectors covered under the Startup Act are fully exempted permanently and forever, regardless of the size of the profit, and duration of the investment; however, those not exempted will pay Capital Gain Tax (CGT).
“If PE firms invest in a sector that does not have that exemption, and you want to exit. If you’re exiting, you’re allowed to pay on a net basis.”
“ It’s up to you to decide what your income is, what your gain is, what your loss but if you’re exiting and you have a net gain position, you pay tax on it,” Oyedele said.
Oyedele explained that if private equity firms sell an investment that would typically be taxed, they can achieve a permanent exemption from Capital Gains Tax by immediately reinvesting the full sale proceeds into another Nigerian business.
“This allows you to avoid paying tax on the entire gain, and the reinvested amount is treated as the new cost basis for the new investment, effectively ‘resetting’ the taxable gain and encouraging the continued circulation and growth of capital within the country,” he said.