Nigeria’s new tax regime is changing the way companies must think about mergers, acquisitions and corporate restructuring. The reform may strengthen government revenue, but it also introduces a level of complexity that could make some corporate transactions more expensive, slower and more difficult to execute and it should concern policymakers.
Under the Nigeria Tax Act 2025, which took effect on January 1, 2026, capital gains have been brought into the corporate income tax framework, with assessable gains from the disposal of chargeable assets, including shares, generally subject to the applicable 30 percent rate. This represents a significant increase from the previous 10 percent capital gains tax rate.
“A qualifying merger, for example, can be treated as a continuation of the existing businesses rather than a cessation. Assets transferred may therefore avoid chargeable gains, while certain unused tax attributes, including losses and capital allowances, can remain available subject to the law’s conditions.”
The immediate implication is that companies contemplating taxable disposals, particularly outright asset or business sales, must now factor a substantially larger potential tax liability into their transaction calculations.
But the more important issue is that the tax consequences are no longer determined simply by whether a company is buying or selling. They increasingly depend on how the transaction is structured.
A qualifying merger, for example, can be treated as a continuation of the existing businesses rather than a cessation. Assets transferred may therefore avoid chargeable gains, while certain unused tax attributes, including losses and capital allowances, can remain available subject to the law’s conditions.
Equally, a transaction structured as a business or asset sale resulting in cessation may produce a very different outcome.
This creates both an opportunity and a danger.
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The opportunity is that companies can legitimately structure transactions more efficiently. Businesses considering consolidation can examine whether a qualifying merger or restructuring better serves their commercial objectives than an outright disposal.
The danger is that tax considerations could begin to dominate decisions that should primarily be driven by economic and commercial logic.
Two transactions with essentially the same business objective should not produce dramatically different economic outcomes simply because the legal structure is difficult to interpret or compliance requirements are cumbersome.
There is also a broader concern for investment.
Nigeria needs capital, corporate expansion, industrial consolidation and stronger domestic companies. In sectors such as banking, oil and gas and other capital-intensive industries, mergers and acquisitions can provide a mechanism for raising capital, improving efficiency, preserving jobs and creating stronger institutions.
The banking sector is particularly important given the ongoing recapitalisation exercise. If tax uncertainty makes consolidation unnecessarily expensive or complicated, the consequences could extend beyond individual companies to the stability and competitiveness of entire sectors.
The cross-border implications are equally significant.
The new regime potentially brings certain indirect transfers of shares into the Nigerian tax net, where offshore transactions change ownership structures involving Nigerian companies or interests in Nigerian assets. For multinational businesses, this means that a transaction executed outside Nigeria could nevertheless create Nigerian tax consequences.
That may be justified where significant economic value is genuinely derived from Nigeria. But it also underscores the need for clear rules that investors can understand before committing capital.
Tax administration must therefore avoid creating a situation where companies discover their liabilities only after transactions have been negotiated or completed.
The requirement for businesses to notify the tax authority before restructuring a trade or business adds another layer of compliance. While regulatory oversight is necessary, unnecessary delays can increase transaction costs and undermine time-sensitive commercial negotiations.
The way forward is not to weaken the tax reform but to make its implementation predictable, transparent and business-friendly.
The Federal Government and tax authorities should issue clear, practical guidelines explaining how merger relief, asset transfers, tax losses, capital allowances, withholding-tax credits and cross-border transactions will be treated. There should be little room for contradictory interpretations between taxpayers and tax officials.
The authorities should also establish efficient advance-ruling or pre-transaction clarification mechanisms, enabling companies to understand their tax exposure before committing to major transactions.
Equally important, tax administration must distinguish between legitimate tax planning and abusive tax avoidance. Companies should be free to choose commercially sensible structures that lawfully minimise unnecessary tax exposure. What should be targeted is artificial arrangements designed solely to evade tax.
Corporate boards, meanwhile, must abandon the old practice of treating tax as an afterthought. Tax implications should be incorporated into transaction planning from the beginning, alongside financing, regulatory, operational and shareholder considerations.
Professional advisers also have a greater responsibility to provide clear guidance rather than encouraging complicated structures merely for tax advantage.
Ultimately, Nigeria’s tax reform should raise revenue without undermining the investment and restructuring activity that generates that revenue in the first place. The objective should be a tax system that captures its fair share from corporate transactions while giving investors confidence that the rules are stable and understandable.
Mergers and acquisitions should remain instruments for building stronger Nigerian businesses, not become tax minefields where companies are forced to choose structures primarily to avoid unexpected liabilities.
