Tax and Transfer Pricing, Thought Leadership

Capital Gains Tax and Capital Market Transactions

Gains from disposal of shares and government securities are exempted from CGT in Nigeria (See Section 30 CGTA).
It is doubtful that this exemption is in line with international best practices or that it encourages retail investing while encouraging people to dispose of shares fluidly. In the US for instance, gains from stocks and other securities are the most common in the economy.
Though CGT may have a ‘locked in’ effect, increasing the supply of securities in a falling market and reducing the supply of securities in a rising market, there is no concrete evidence that it serves to discourage foreign direct investment.
If recent statistics from The Nigerian Stock Exchange (The Exchange) in Q2 2017 are anything to go by, so much progress has been made since setbacks earlier in the year. However, comparative showings of the NYSE and LSE pegs the NSE’s growth as slightly underwhelming.
The commercial implication would be largely positive for the 8 newly listed companies as they can generate a lot more capital when they go public, selling stock in an initial public offering (IPO).
Sequel to happenings earlier in the year when Seven Up Bottling Company applied to delist from the Exchange, the current numbers are appreciable as an indicator of the higher level of investor confidence in the Exchange.
However, as securities remain a means for shareholders to make money through capital appreciation, dividends or bonuses from investing in the shares of quoted companies, delisting remains a challenge to the NSE. Delisting is the removal of listed securities from the Exchange.
The Nigerian situation has consistently seen securities listed and eventually delisted for non compliance with the Listing Rules of The Exchange or for breach of the General Undertaking at the time of listing. Public reaction has cited a combination of a weak Naira and lack of belief in the regulators as a reason for voluntary delisting.
In light of the above, strong showings like The Exchange’s August statistics (above) surmise Nigeria’s biggest opportunity for growth and openness for investment.
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