Nigeria’s new capital beneficial properties tax sparks overseas VC anxiousness

Nigeria’s new tax regulation, which replaces the standalone Capital Positive aspects Tax Act with a unified regime and overhauls how capital beneficial properties are assessed, may gradual overseas enterprise capital funding within the nation’s startup ecosystem, in line with a number of VC executives who spoke to TechCabal.

The buyers say the modifications compound present issues about regulatory unpredictability and foreign money threat. 

The Nigeria Tax Act (NTA) 2025 raises capital beneficial properties tax for corporations from a flat 10% to as excessive as 30% and introduces an “financial nexus” rule. The rule permits Nigerian authorities to tax offshore share gross sales if greater than half of the underlying worth is derived from Nigerian property.

The modifications come at a time when overseas funds already face restricted exit pathways, liquidity constraints, and macroeconomic volatility earlier than investing in Nigerian startups. 

The next tax burden on exit proceeds additional compresses returns, rising the danger that buyers redirect capital to different African markets. 

“For founders, this implies your exit valuation must be 20% increased simply to present your buyers the identical web return they anticipated in 2024,” mentioned Segun Cole, CEO of Maasai VC, a mergers and acquisitions Software program-as-a-Service platform and market. “Funding readiness now consists of proactive tax modelling earlier than you even signal a time period sheet.”

Underneath the earlier tax regime, Part 46(e) of the Capital Positive aspects Tax Act largely shielded offshore share disposals from Nigerian taxation. If a non-resident firm bought shares registered outdoors Nigeria and the proceeds weren’t introduced into the nation, the transaction usually escaped Nigerian CGT, even when the underlying enterprise operated domestically.

That defend has now been eliminated.

Part 46(f) of the brand new Act introduces a 50% worth take a look at. If, inside the previous three hundred and sixty five days, greater than half of the worth of the shares being disposed of is derived instantly or not directly from Nigerian property, together with shares in a Nigerian firm or immovable property, the shares are deemed located in Nigeria, and the acquire turns into taxable domestically. 

Part 46(g) expands this additional by deeming shares located in Nigeria if the entity is Nigerian or if the useful proprietor is resident in Nigeria or has a everlasting institution linked to the shares.

In impact, promoting a Delaware or United Kingdom holding firm will not assure insulation from the capital acquire tax if the enterprise’s worth is primarily derived from Nigeria. For enterprise funds, this closes what policymakers describe as an “offshore loophole” and introduces jurisdictional complexity into cross-border exits. the place none existed earlier than.

“Shifting from 10% to 30% CGT in a single day modifications the Inside Price of Return (IRR) for each VC fund out there,” mentioned Cole. “For a overseas fund, this 30% ‘toll gate’ on the exit may make Nigeria much less engaging in comparison with Kenya or Egypt, which nonetheless preserve extra aggressive exit taxes.”

Nigeria modified its tax guidelines to herald extra money for the federal government as a result of it presently collects little or no tax in comparison with the dimensions of its financial system. Nonetheless, consultants imagine the nation can improve income with out discouraging long-term buyers.

“Positive aspects ought to be taxed as soon as realised,” mentioned Oswald Osaretin Guobadia, managing accomplice at advisory and coverage agency DigitA. “However we are able to provide incentives to defer beneficial properties tax if the quantities are reinvested.”

As a former Senior Particular Assistant to the Nigerian President on Digital Transformation, Guobadia performed an energetic position within the creation of the Nigerian Startup Act, which grants some stage of tax exemptions to startups.

He isn’t alone in downplaying the tax’s impact. 

“I do probably not fear about taxes in Nigeria. Solely a profitable funding pays tax. I prefer to give attention to getting cash first earlier than over-focusing on tax. Let me have the win, the federal government deserves its personal portion,” mentioned Ndubuisi Ekekwe, founder and CEO of Tekedia Capital, an early‑stage funding agency with portfolio corporations in america and Africa.

From 10% to 30%

Equally vital is the upper tax charge on oblique transfers when an offshore dad or mum firm sells shares in a overseas entity that, in flip, owns a Nigerian asset.

The previous flat 10% CGT for corporations has been scrapped. Underneath the brand new regime, beneficial properties are aligned with customary company revenue tax charges. Massive corporations now face 30%. For upstream oil and gasoline corporations nonetheless assessed below the Petroleum Revenue Tax Act, charges can climb as excessive as 85%.

For people, capital beneficial properties are not taxed individually at 10%. As an alternative, they’re now mixed with whole revenue and taxed at progressive charges between 0% and 25%.

“Shifting from a ten% to 30% CGT regime in a single day basically shifts the Inside Price of Return (IRR) for each VC fund working in Nigeria,” mentioned  Maasai VC’s Cole.  “For overseas funds, this 30% toll gate at exit may make Nigeria considerably much less engaging than markets like Kenya or Egypt, which nonetheless provide extra aggressive exit tax environments.”

Maasai VC focuses on serving to startups safe exits, together with getting acquired by bigger corporations, reasonably than elevating enterprise funding. Cole famous that if a dad or mum firm in London is acquired and it owns a Nigerian subsidiary, that world deal may nonetheless set off a tax occasion in Lagos. This, he mentioned, provides a considerable layer of complexity and price to worldwide M&A due diligence.

“Nigeria is saying: ‘For those who earn a living from our market, we’re taking our third.’ For founders, this implies your exit valuation must be 20% increased simply to present your buyers the identical web return they anticipated in 2024,” he mentioned. “Funding readiness now consists of proactive tax modelling earlier than you even signal a time period sheet.”

Authorities officers argue the coverage closes loopholes that enable corporations to reclassify revenue as capital beneficial properties to safe decrease tax charges. It additionally strengthens Nigeria’s capacity to tax offshore transactions that derive worth from the native market. From a fiscal standpoint, the shift could also be justified, however for the enterprise ecosystem, it’s deeply destabilising.

‘That’s sufficient for us to not make investments’

A basic accomplice at a overseas VC fund centered on Africa, who requested anonymity due to the sensitivity of the matter, mentioned the actual downside is the duty to file Nigerian taxes within the first place. 

Earlier than the capital beneficial properties tax got here into impact in January 2026, Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Coverage and Tax Reforms, had reportedly dedicated to lowering the speed from 30% to 25%, however that change has not but materialised.

“As a global investor, we must file taxes in Nigeria. Even when it was a really low tax charge, most worldwide buyers who don’t should spend money on Nigeria would say that’s sufficient for us to not do the funding,” the accomplice mentioned.

The second concern is the tax charge itself. The accomplice mentioned that making use of a excessive capital beneficial properties tax in an already dangerous setting pushes funding thresholds past what most funds can justify. 

“We already mannequin potential foreign money devaluation and lack of liquidity. We typically put a 20% low cost based mostly on worldwide comparatives,” the accomplice mentioned. “Including one other 27.5% markdown for potential capital beneficial properties makes the hurdle too excessive.” 

The implication is that even Africa-focused funds might start to underweight Nigeria, whereas world funds with out continental mandates might merely decide out.

Timi Olagunju, a coverage professional, believes the provisions aren’t unreasonable in precept however might have come on the incorrect time.

“VCs are all about exit ease and notion,” he mentioned. “Notion can have consequential results on actuality. Inventory costs rise and fall by this alone.”

He pointed to Nigeria’s already risky overseas alternate setting, coverage uncertainty and safety challenges: “Most buyers are already cautious. This may occasionally have come too early.”

Nigeria’s exit setting additional complicates issues. Not like developed markets, the place IPOs provide a transparent path to liquidity, most Nigerian startup exits happen via commerce gross sales. As of February 2026, the Nigerian Trade (NGX) Expertise Board, created in 2022 to draw high-growth expertise corporations, has but to file a single itemizing.

“Our exits are principally commerce gross sales, not IPOs,” Olagunju mentioned. “So including additional layers of taxation makes it undesirable for VCs.”

In a market the place liquidity occasions are uncommon, rising friction on the level of exit strikes on the coronary heart of enterprise economics.

A authorities supply, talking on situation of anonymity as a result of he’s not authorised to remark formally, framed it as a matter of equity. 

“If an asset derives its worth from the Nigerian market, why shouldn’t Nigeria earn income when that asset is bought?” the official requested. “Revenue made right here ought to generate returns for the nation?”

The second leg of the argument lies within the integration of incentives from the Nigeria Startup Act (NSA) into the NTA framework.

Underneath the Startup Act, capital beneficial properties from the disposal of shares in a labelled startup might be exempt if held for at the least 24 months. Nonetheless, qualification for labelling requires, amongst different situations, that at the least one-third of possession be held by Nigerians.

“When you have one-third Nigerian possession, you will get the exemption,” the official defined. “So there may be an exception.”

But VCs argue that this threshold is unrealistic for venture-backed corporations that usually depend on worldwide capital. Many overseas buyers are reluctant to cede 33% possession merely to safe tax aid.

“For those who ask me,” the federal government supply admitted, “the place Nigeria is when it comes to capital influx wants, we must always have opened it up. For expertise, the place we’re nonetheless making an attempt to draw cash, perhaps we must always have dropped that provision.”

Kenya as a distinction

Nigeria’s method contrasts sharply with Kenya’s evolving tax regime. In 2023, Kenya elevated its CGT charge from 5% to fifteen%  and expanded its capacity to tax oblique transfers. Nonetheless, it maintains CGT as a separate last tax. As soon as paid, the duty ends.

Nigeria, against this, integrates capital beneficial properties into customary revenue taxation at as much as 30% for corporations.

Kenya has additionally confronted litigation, together with the high-profile case involving personal fairness agency ECP over the sale of Java Home, the place the tax authority argued the beneficial properties constituted enterprise revenue taxable at 30% reasonably than capital beneficial properties on the preferential charge.

Nigeria’s alignment removes that classification dispute, however at the price of the next efficient burden.

As one VC places it, “A 27.5% capital beneficial properties tax is excessive regardless of the place you might be.”

Diversification as workaround

Probably the most fast behavioural response might not be withdrawal, however diversification.

If the 50% rule hinges on worth derived from Nigeria, corporations might search to dilute their Nigerian publicity.

“Our portfolio corporations are already excited about ensuring lower than 50% of worth is coming from Nigeria,” the overseas GP mentioned. “Proper now we assume ‘worth’ means income.”

That would translate into accelerated growth into Kenya, South Africa, Egypt or Francophone West Africa, not purely for progress, however for tax positioning.

One other VC govt, who additionally requested anonymity as a result of sensitivity of the problem, echoed the priority.

“You’ll begin seeing corporations place much less of their operations in Nigeria,” the chief mentioned. “If by the point of exit, Nigeria is barely 10% of the portfolio worth, then virtually they’ll function outdoors.”

The readability downside

The shortage of readability round what constitutes worth is even a deeper downside than the speed and nexus. It could possibly be income, earnings earlier than tax, property, mental property, headcount or some mixture. Proper now, nobody is aware of for certain. 

If a startup’s holding firm is domiciled in Delaware, its mental property sits offshore, and its Nigerian subsidiary generates solely a part of its income, how will CGT be calculated?

“Will or not it’s utilized to the complete holdco sale or simply the Nigerian part?” one VC requested. “Who makes that dedication?”

The absence of detailed steering heightens compliance threat. For world funds with strict inside controls, uncertainty itself might be disqualifying.

“Something that feels non-standard and unclear makes buyers outdoors Nigeria uncomfortable,” the chief mentioned. “International funding is tough sufficient already. Layering on complexity doesn’t assist.”

Quick-term acquire, long-term threat

One other VC govt questions the fast fiscal upside.

“What number of exits have actually occurred?” he requested. “It’s all theoretical. Within the quick time period, sure, they could get one thing. In the long run, it would scale back FDI and put all the things on a adverse tailspin.”

Imposing increased taxes earlier than vital exit quantity materialises might generate restricted income whereas altering investor psychology.

As one govt places it, “Danger, reward. Why take all this threat for a reward I can get within the US with threat I perceive?”

If overseas VCs pull again, native buyers can not step in at scale.

“Anytime there’s capital flight, native buyers undergo,” a VC mentioned. “There’s no nation on the planet that claims overseas capital ought to depart.”

Enterprise capital is inherently excessive threat. Even small share reductions in exit proceeds materially have an effect on fund efficiency.

“If returns are already arduous, any share that comes out of it doesn’t assist,” the chief added.