Nigerian stocks tumbled the most in 15 years as foreign investors rushed to sell ahead of a new tax regime set to triple capital gains taxes.
The NGX All-Share Index fell 5% on Tuesday, the steepest decline since March 19, 2010. The drop marked the seventh consecutive session of losses, the longest losing streak since Aug. 1, 2024, according to data compiled by Bloomberg. That contrasted with gains in the MSCI Emerging Markets Index.
“It’s the whole capital-gains-tax issue, a bit more clarity is needed on it,” said Victor Aluyi, co-managing partner at Aztran Global Investments. The “market is somewhat nervous,” he said.
Africa’s most populous country last month announced that foreign investors will face a 30% capital gains tax on the sale of Nigerian shares starting in January from 10% currently, unless the proceeds are reinvested in other listed or unlisted domestic equities. The measure is part of fiscal changes aimed at boosting government revenue.
“Investors are taking profit to rebalance their portfolio ahead of the implementation of the capital gains tax,” said Omobola Adu, analyst at CSL Stockbrokers Ltd., a unit of FCMB Group Plc. For institutional investors that have held their positions for a long time, they can take profits now and pay a 10% CGT, or wait until next year and pay about 30%, he said.
The largest companies on the Lagos-based exchange led Tuesday’s market rout. Dangote Cement Plc, owned by Africa’s richest person Aliko Dangote, MTN Nigeria Communications and BUA Cement Plc all fell 10%. The NGX is now the world’s worst-performing equity market month-to-date, with an 8% decline in November.
There is only one way to stop the market decline and that is to remove or suspend the CGT on listed equities, said Kato Mukuru, founding partner at Emerging & Frontier Capital LLP. “It makes the cost of investing in Nigeria too high versus peers and even if the government insists on it, it should not be retroactive.”
Written by: Anthony Osae-Brown and Nduka Orjinmo — With assistance from Emele Onu @Bloomberg
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