Capital Gains Tax and Investment in the Nigerian Stock Market

This study examines the relationship between capital gains tax policy and investment activity in the Nigerian stock market. Capital gains tax in Nigeria has historically been applied in a limited and inconsistent manner, with gains from securities transactions on the Nigerian Exchange Group remaining exempt under certain legislative conditions. Recent policy discussions around the reintroduction of capital gains tax on listed securities have generated significant debate about potential impacts on investor behaviour and market liquidity. This research adopts an ex-post facto design, drawing on historical trading data from the Nigerian Exchange Group, budget documents, and published fiscal policy reports spanning five years. Primary data from a survey of 100 retail and institutional investors in Lagos and Abuja supplement the documentary analysis. Descriptive statistics and regression analysis are the primary analytical tools. The study anticipates finding that investor sensitivity to capital gains tax is high, with tax policy uncertainty contributing to market volatility and reduced equity investment. It further identifies that tax exemptions for pension funds and long-term investors are viewed as important incentives supporting market depth. Recommendations include maintaining capital gains exemptions on listed securities while phasing in targeted levies on short-term speculative trades. Transparent and predictable tax policy communication is advocated as essential for sustaining investor confidence. Keywords: capital gains tax, stock market investment, Nigerian Exchange Group, investor behaviour, fiscal policy.