Biggest one-day fall in 15 years! New tax fears batter Nigerian stocks

Nigerian stocks suffered their steepest single-day decline in 15 years on Tuesday as jittery investors dumped shares over fears of a new capital gains tax regime that could triple existing rates.

The NGX All-Share Index, which tracks the performance of listed companies in Nigeria, plunged 5.01% to close at 141,327.30 points. The drop wiped out an estimated ₦4.64 trillion in market value, pulling total capitalization below the ₦90 trillion mark to ₦89.88 trillion. It was the sharpest daily loss since March 2010 and capped a seven-session losing streak – the longest since August.

Shares of major companies like Dangote Cement, MTN, and BUA Cement fell the most, each declining the maximum 10%. Aradel Holdings fell 9.67%, while Guaranty Trust Holding Company shed 7.69%.

“It’s the whole capital-gains-tax issue — a bit more clarity is needed on it,” Bloomberg quoted Victor Aluyi, co-managing partner at Aztran Global Investments, as saying. “The market is somewhat nervous.”

Last month, the federal government said foreign investors would face a 30% capital gains tax on the sale of Nigerian shares from January, up from the current 10%, unless proceeds are reinvested locally. The policy, part of sweeping fiscal reforms, has unnerved investors and triggered widespread profit-taking.

“Investors are taking profit to rebalance their portfolios ahead of the implementation of the capital gains tax,” said Omobola Adu, an analyst at CSL Stockbrokers Ltd., a unit of FCMB Group Plc. He told Bloomberg that institutional investors were “locking in gains now to pay a 10% CGT, rather than wait until next year and pay about 30%.”

The government tried to calm markets after close of business on Tuesday, claiming the new tax policy will not burden small investors. The Presidential Fiscal Policy and Tax Reforms Committee said the capital gains tax framework is designed to be “fairer and simpler,” protecting retail investors while aligning Nigeria’s system with international standards.

It added that the reform is not aimed at raising revenue but at harmonizing overlapping tax laws and building investor confidence. By exempting small investors, pension funds, and venture funds that reinvest locally – and allowing deductions for genuine investment losses and expenses – the committee said the plan will deepen participation in the capital market and reduce long-term investment risks.

The reassurance appeared to steady sentiment, with the All-Share Index rebounding 2.88% on Wednesday, trimming part of the previous day’s losses.

Still, Tuesday’s plunge made the NGX the world’s worst-performing markets this month, down about 8% in November, according to Bloomberg data. Analysts say halting or suspending the new tax on listed equities may be the only way to stem the selloff.