Nigerians investing in shares, bonds, funds, property, and other assets can legally reduce the tax they pay by taking advantage of exemptions and favourable tax treatments under the country’s new tax regime.
The Nigeria Tax Act 2025, which took effect on January 1, 2026, changed the treatment of several forms of investment income and gains, making tax an increasingly important consideration for investors when assessing returns.
LessaTax, in an article titled “How Nigerians Can Legally Reduce the Tax They Pay on Their Investments,” highlights several ways investors can structure their investments to take advantage of exemptions and reduce their tax burden while remaining compliant with the law.
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Government bonds can offer tax-free income
One of the clearest opportunities is in government securities.
Income from federal and state government bonds is exempt from tax under the new law, according to an article by Udo Udoma & Belo-Osagie titled ‘Key Tax Incentives Under the Nigeria Tax Act.’
This means investors comparing two investments with similar headline returns may end up with different after-tax amounts depending on the security chosen.
For instance, a lower-yielding government bond could deliver a more competitive return after tax than a higher-yielding taxable investment because the bond income is exempt.
The tax treatment should not, however, be the only consideration, as risk, liquidity, and expected return also determine the attractiveness of an investment.
Collective investment schemes can also offer tax advantages
Investors can also reduce their tax exposure by considering how they invest, not just what they invest in.
Collective investment schemes pool money from investors and invest in assets such as shares and bonds. Dividends distributed by authorised collective investment schemes are exempt from income tax under the Nigeria Tax Act.
Udo Udoma & Belo-Osagie said the exemption could make collective investment schemes more attractive to retail investors by reducing the tax disadvantage associated with investing through such vehicles.
This means investors should consider not only what an investment earns, but also how the income is distributed and taxed.
Read also: MAN seeks safeguards for manufacturers under new tax law
Foreign investment income comes with conditions
Investors earning income from abroad may also benefit from specific exemptions, although these come with conditions.
Certain foreign-sourced dividends, interest, rent, and royalties can qualify for exemption where they are brought into Nigeria in convertible currency through approved channels and paid into an approved local bank account, according to PwC.
Simply investing abroad, however, does not automatically make the income tax-free. Investors need to meet the conditions attached to the exemption and understand their wider Nigerian tax obligations.
Investors selling assets face a different calculation
The tax implications become more important when an investor sells an asset at a profit.
Under the new regime, individuals no longer pay the former flat 10 percent capital gains tax on chargeable gains. PwC said capital gains for individuals are now taxed at the applicable progressive personal income tax rates.
The law nevertheless provides relief for some share disposals.
Gains from the disposal of shares can qualify for exemption where the proceeds do not exceed N150 million in any 12 consecutive months, and the attributable gain does not exceed N10 million, according to PwC. Certain proceeds reinvested in shares can also qualify for relief.
This makes it important for investors to understand the tax consequences before selling a large portfolio rather than after the transaction has been completed.
No withholding tax does not always mean no tax
Investors should also distinguish between withholding tax and their final tax liability.
The absence of withholding tax on a particular investment income does not automatically mean the income is tax-free. Likewise, tax deducted at source may in some circumstances serve as a credit against the investor’s final liability rather than being the final tax.
Understanding the distinction can prevent investors from underestimating what they may eventually owe.
Tax planning starts before the investment
For investors, tax planning should begin when they are deciding where to put their money, not when the tax bill arrives.
A 17 percent return on a taxable investment, for example, cannot be assessed in isolation from a 15 percent return that is exempt from tax. The investor needs to compare what each option actually leaves in their pocket after tax, while also considering the risks involved.
The same applies to someone deciding whether to invest directly in securities or through an authorised fund, or an investor holding foreign assets who needs to determine whether the conditions for an exemption have been met.
Nigeria’s new tax regime therefore makes after-tax return a more important part of investment decisions. Investors who understand the rules before buying, earning, or selling an asset can legally retain more of their returns while avoiding the cost of discovering a tax liability only after the investment has already been made.
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