Tax Reform Sends Strong Signal On Policy Direction

Analysts at Cordros Research have warned that a combination of far-reaching policy reforms and rising political risk could significantly influence Nigeria’s financial markets in 2026, potentially reshaping investor behaviour while introducing bouts of volatility as the country heads into a pre-election year.

At the centre of these anticipated shifts is the Nigerian Tax Act 2025, which introduces sweeping changes to the country’s tax framework.

According to Cordros, the most consequential of these reforms for the capital market is the increase in Capital Gains Tax (CGT) on equity disposals from 10 per cent to 30 per cent.

The analysts noted that this adjustment, alongside the introduction of a progressive tax structure, higher exemption thresholds and roll-over relief provisions, is likely to alter investment patterns across market segments.

While the broader retail investor base is expected to remain largely insulated due to exemptions, high-net-worth individuals and institutional investors, excluding pension funds, will face significantly higher transaction costs when exiting equity positions.

For foreign investors, Cordros said the steeper CGT regime could discourage short-term, opportunistic inflows and instead promote a shift toward longer-term investment positioning in Nigerian assets.

Beyond taxation, the analysts highlighted the National Insurance Industry Reform Act (NIIRA 2025) as another major policy development expected to influence market dynamics.

The reform aims to strengthen the insurance sector through higher capital requirements, improving insurers’ capacity to underwrite larger and more complex risks.

Cordros believes this will enhance market efficiency, increase the sector’s attractiveness to investors and support higher equity investments by insurance companies over time.

The firm added that, although the full impact of both the tax and insurance reforms will take time to materialise, the combined effect is likely to support deeper market liquidity and a gradual shift toward more stable, long-term capital inflows. This, in turn, could contribute to the sustainable growth of Nigeria’s capital market.

However, Cordros cautioned that the positive medium- to long-term outlook could be moderated in the near term by political considerations.

With 2026 marking the start of Nigeria’s pre-election cycle, analysts expect a degree of investor caution as political risk premiums begin to rise.

Historically, Nigerian equities have tended to underperform in pre-election periods, as markets price in concerns around fiscal slippage, policy uncertainty and broader macroeconomic risks.

Cordros pointed to past election cycles to underscore this pattern, noting that the market recorded significant pullbacks in 2014 and 2018, with declines of 16.1 per cent and 17.8 per cent respectively.

Similar dynamics could emerge in 2026, potentially manifesting in slower capital deployment, reduced trading conviction and a stronger preference for high-quality, liquid stocks.

Despite these headwinds, the analysts stressed that they do not expect the election cycle to derail overall market performance.

Instead, they anticipate episodic volatility and tempered near-term momentum, even as underlying fundamentals and reform-driven improvements remain supportive of the broader market outlook.

Cordros noted that Nigeria’s markets in 2026 will likely be shaped by the interplay of structural reforms and political risk, with higher CGT rates encouraging longer-term investment strategies, while pre-election uncertainty introduces intermittent volatility along the way.