As Nigeria’s new tax reforms begin to take effect, investors are weighing whether clearer rules will be enough to sustain confidence into 2026, or whether higher capital gains taxes and enforcement risks could dampen appetite for equities and foreign capital.
“Investors are very cautious at the moment about how all of this is going to pan out,” said Omoniyi Animashaun, private wealth manager at an asset management firm in Lagos.
When the reforms were first published in 2025, investor sentiment weakened amid concerns that higher taxes, particularly under the revised Capital Gains Tax (CGT) framework, could significantly erode returns. Market participants feared that a larger share of profits would be absorbed by taxes, triggering uncertainty across the equities market and contributing to a period of heightened volatility.
The unease was most pronounced around the CGT proposals, which investors worried could reduce net gains and discourage long-term participation in the market. Analysts said the lack of clarity at the initial stage amplified fears, as investors struggled to assess how the reforms would affect pricing, portfolio rebalancing, and capital inflows.
Sentiment improved, however, after the government clarified the scope, timing, and implementation of the reforms, signalling a willingness to engage with capital market stakeholders. Over the full year, market performance remained resilient. By the end of 2025, the NGX All-Share Index had risen 51.19 percent to 155,613 points, from 102,926 at the start of the year. Total equity market capitalisation expanded by more than N36.6 trillion to N99.38 trillion, marking one of the largest absolute increases recorded across global equity markets during the period.
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While the strong rally suggested that fears had eased, analysts caution that market performance alone does not guarantee durable confidence. In its 2026 outlook, Cordros Securities said transparent implementation would be critical to sustaining momentum.
“If implemented transparently, with clear rules and effective digital platforms, these measures can deepen formalisation and crowd in private capital rather than simply raising the tax burden on existing payers,” the firm said.
Government officials have also sought to reassure investors that the reforms are designed to enhance competitiveness rather than deter capital. Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, said the new tax law aligns Nigeria with practices in other African markets and addresses long-standing investor concerns.
“Foreign investors will not be paying taxes when they have made losses in dollar terms, as they do currently,” Oyedele said. “This makes the market more competitive and attractive, while ensuring harmonisation and ease of compliance.”
Despite the improved communication, concerns persist over whether higher CGT rates could weigh on investment appetite once fully implemented. Analysts note that while clarity helped stabilise sentiment in 2025, the real test will come in 2026, when investors can assess the reforms’ actual impact on returns, compliance costs, and enforcement consistency.
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Market participants say the shift from policy announcement to execution introduces a new layer of risk. Differences between stated policy intent and on-the-ground enforcement could influence how both domestic and foreign investors position their capital in the months ahead.
“If all of these are done transparently by the government, it would, in turn, increase investor confidence both domestically and internationally,” Animashaun said.
For policymakers, the challenge lies in ensuring that clarity is matched by predictable enforcement and a stable macroeconomic environment. Observers note that investor confidence in 2026 will depend not only on the design of the tax reforms, but on how effectively they are executed, determining whether improved transparency ultimately strengthens or weakens Nigeria’s investment appeal.
