New Capital Gains Tax Rules for Nigerian M&A Transactions

The recent amendments to the capital gains tax framework under the Nigeria Tax Act, 2025, significantly expand the material and territorial scope of what constitutes a chargeable asset for capital gains tax purposes in Nigeria, with implications for mergers and acquisition transactions in Nigeria. Except for exemptions provided under Part I of Chapter Eight of the Nigeria Tax Act, virtually all forms of property, whether located within or outside Nigeria, are now considered chargeable assets for capital gains tax purposes. The phrasing under the Nigeria Tax Act establishes a worldwide basis of taxation for Nigerian tax residents

Scope of Chargeable Assets

The Nigeria Tax Act provides that the following categories of property fall within the definition of chargeable assets:

1. Tangible and intangible assets, including shares, options, rights, debts, digital or virtual assets, and other incorporeal property.

2. Foreign currency, meaning any currency other than the Nigerian Naira.

3. Self-created property, or property that comes to be owned without direct acquisition.

Capital Gains Tax Exemptions Relating to Shares

While gains on the disposal of shares in Nigerian companies are generally chargeable, the Nigeria Tax Act introduces important exemptions designed to encourage investment and capital market activity. Specifically, no capital gains tax will apply where:

1. Where the total disposal proceeds within any 12-month period are less than ₦150 million, and the chargeable gain does not exceed ₦10 million;

2. Where shares are transferred between an approved borrower and lender in a regulated securities lending transaction;

3. Where the proceeds from disposal are reinvested within the same year of assessment in acquiring shares of the same or another Nigerian company. In this case, tax applies only proportionally to the portion of proceeds not reinvested; and

4. In respect of gains accruing from the disposal of assets by an angel investor, venture capitalist, private equity fund, accelerator, or incubator with respect to a labelled startup, provided the assets have been held in Nigeria for a minimum of 24 months.

Interaction with Capital Expenditure

Importantly, capital gains tax applies even where the asset in question has been the subject of qualifying capital expenditure under any other section of the Nigeria Tax Act. In effect, capital allowance claims do not exempt an asset from being subject to capital gains tax upon disposal.

Implications for Mergers & Acquisitions Transactions in Nigeria

For private equity and strategic investors, Nigeria’s revised capital gains tax framework underscores the importance of early tax planning in deal structuring. The broadened definition of chargeable assets now captures a wider range of instruments, including shares, options, and digital assets, which are commonly exchanged in mergers and acquisitions.

Thus, it would be prudent to pay close attention to:

1. Transaction thresholds and exemptions, especially where share disposals fall below ₦150 million or where proceeds are reinvested within the same year of assessment.

2. Documentation and timing of reinvestment, as eligibility for rollover relief depends on clear evidence that proceeds were reinvested in Nigerian companies within the relevant tax period.

3. Cross-border considerations, particularly where offshore holding structures are used to acquire or divest Nigerian entities, since tax residency and the location of assets can trigger parallel CGT liabilities in multiple jurisdictions.

4. Cross-border structuring opportunities under Nigeria’s Double Tax Treaties (DTTs). DTTs often contain provisions that either reduce or eliminate capital gains tax on disposals by residents of treaty partner countries. Where a qualifying holding structure exists, treaty reliefs can significantly reduce tax leakage on exit.

5. Residency and beneficial ownership tests, as these determine whether treaty benefits are available. We expect that the economic substance of such offshore vehicles will increasingly be subjected to scrutiny by the Federal Inland Revenue Service (FIRS).

6. Due diligence on sellers’ tax positions, as undisclosed or unpaid capital gains liabilities can become a post-closing risk for acquirers.

7. The need for entities engaged in securities lending or portfolio rebalancing to maintain detailed transaction records to substantiate claims for exemption or reinvestment relief.

Conclusion

The revised framework reflects Nigeria’s effort to modernize its capital gains tax system in line with evolving asset classes and global trends. More than previously, it would be critical for taxpayers to maintain robust documentation and to seek professional guidance when structuring disposals or reinvestments to ensure compliance and to minimize exposure to capital gains tax