AfriPulse
…Heightened Geopolitical Tension, Looming Capital Gains Tax Stir Investor Caution
…Analysts Say Fundamentals Remain Strong Despite Short-Term Market Volatility
Bearish trading on the Nigerian Exchange Limited (NGX) deepened significantly in the review month as heightened geopolitical tension and uncertainty over the Federal Government’s new Capital Gains Tax (CGT) framework triggered heavy sell-offs across key sectors.
The All-Share Index (ASI) fell by 6.88 per cent to close at 143,520.53 points, down from 154,126.46 points in October, while market capitalisation declined by N6.54trn to N91.29trn from N97.83trn.
Market analysts said the sharp downturn was driven largely by sentiment trading following former U.S. President Donald Trump’s public threat of possible military action in Nigeria, coupled with lingering concerns over the implementation timeline and impact of the revised CGT regime.
The combination, they noted, intensified risk-off behaviour among local and foreign investors, leading to profit-taking in heavyweight stocks.
Trump, in a post on his Truth Social platform, said he had directed the Pentagon to “prepare for possible action” and threatened the suspension of U.S. aid to Nigeria.
His comments rattled the market and amplified fears among investors already grappling with domestic policy uncertainties. President Bola Tinubu swiftly dismissed Trump’s claims, describing them as a misrepresentation of Nigeria’s commitment to religious freedom and national stability.
Investment banker and stockbroker Tajudeen Olayinka said market reactions reflected the sensitivity of investors to both political risk and fiscal policy adjustments.
He noted that the erosion in market value was consistent with the twin pressures of geopolitical tension and the Federal Government’s expected introduction of CGT in 2026.
Olayinka explained that declines in highly capitalised stocks such as Dangote Cement exerted significant downward pressure on the index, worsened by generally negative market sentiment.
Vice Chairman of HighCap Securities, David Adonri, maintained that the dip remained within the bounds of normal market adjustment, stressing that underlying fundamentals were still strong despite short-term volatility. According to him, the year-to-date performance continued to underscore the resilience of Nigeria’s capital market.
Analysts at Cowry Asset Management attributed the sell-off pattern to concentrated institutional offloading and large block trades rather than broad-based participation.
They observed that the alignment of aggressive divestments, sectoral weaknesses and heightened risk aversion signalled major de-risking by institutional players in response to deteriorating sentiment.
Amid heightened concerns, Minister of Finance and Coordinating Minister for the Economy, Wale Edun, moved to reassure investors that the government would take a balanced approach to CGT implementation.
Speaking on the NGX trading floor during the listing of the Ministry of Finance Incorporated (MOFI) Real Estate Investment Fund Series 2, Edun said the government was committed to consultations aimed at ensuring optimal outcomes for the economy. He emphasised that stakeholders’ concerns would be thoroughly evaluated before final decisions were taken.
Under the revised tax framework, capital gains realised from the sale of shares or other equity instruments will attract a higher levy, with the rate for large companies rising from 10 per cent to 30 per cent. Individuals will pay CGT based on applicable income tax bands, while the exemption threshold for share disposals has been increased from N100m to N150m within any 12 months, provided gains do not exceed N10m.
Professional services firm PwC, in its Tax Insight Series report, said the new rules were expected to broaden the tax net but could affect liquidity and foreign investor appetite if not carefully implemented.
Source: TheWhistler | Read the Full Story…
