The Federal Government has clarified how the newly introduced Capital Gains Tax (CGT) on share disposals will apply, following concerns raised by capital market stakeholders.

Speaking at an engagement organized by the Nigerian Exchange Group (NGX), Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, explained the new rule on share disposals.

He said a 25% CGT will be charged on sales of shares where the proceeds are reinvested in fixed income securities or other non-equity assets.

He, however, noted that individual investors will largely not be affected, as the exemption threshold of N150 million annually puts 99.9% of retail investors outside the scope.

“Only very few big investors cross that threshold, mostly institutional players or high net-worth individuals,” Oyedele said.

According to him, the exemption is available only if proceeds from share sales are reinvested in another Nigerian company, whether listed or unlisted.

Where investors exit equities and move their funds into government bonds or other fixed income assets, the tax becomes payable.

This, he explained, is designed to encourage reinvestment in productive equity capital that supports companies, jobs, and long-term economic growth.

On the thorny issue of cost determination, Oyedele stated that the purchase price at the time of acquisition remains the reference cost, even if the shares were bought several years ago.

He admitted this creates distortions because inflation makes historical costs “almost unreflective of real value,” while proceeds look bigger in nominal terms.

“We recognize that this looks unfair, but this is a temporary problem due to the adjustment period,” he said.

He added that the committee had considered indexation adjusting costs for inflation but found it too complex given data limitations at this stage.