Syntheda

Nigeria has initiated a comprehensive financial policy restructuring programme encompassing capital gains tax negotiations, payment system reforms, and investment budgeting changes as the government attempts to balance revenue generation with its ambition to achieve a $1 trillion economy.

The Federal Government has commenced discussions with foreign investors and financial stakeholders following threats to freeze approximately $3 billion in potential investments over proposed capital gains tax changes. Finance Minister Wale Edun clarified the government's position during stakeholder consultations, stating the administration seeks "partners, not speculators" in its investment framework, according to The Nation Newspaper.

The capital gains tax discussions represent a critical juncture for Nigeria's investment climate as the government attempts to broaden its revenue base whilst maintaining attractiveness to foreign capital. The $3 billion figure represents significant potential capital inflows that could support infrastructure development and economic diversification initiatives currently underway.

Investment Budgeting Overhaul

Concurrent with tax policy negotiations, the Federal Government announced a fundamental shift in its investment budgeting approach, introducing performance-based project funding mechanisms designed to eliminate resources allocated to non-performing initiatives. The new framework prioritises measurable results, stronger project delivery timelines, and enhanced private sector participation as core components of the government's $1 trillion economic target strategy.

The budgeting reforms signal a departure from traditional public expenditure patterns, with authorities indicating that projects failing to demonstrate tangible progress or strategic alignment will face funding discontinuation. This performance-based allocation model aims to improve capital efficiency and accelerate the pace of economic infrastructure development across key sectors.

The initiative forms part of broader fiscal consolidation efforts as Nigeria seeks to optimise limited public resources whilst creating conditions conducive to private capital deployment. The government has not disclosed specific thresholds or metrics that will determine project funding continuation, though officials indicated detailed implementation guidelines would be released in subsequent announcements.

CBN Payment System Modernisation

The Central Bank of Nigeria is finalising its Payment System Vision 2028, a comprehensive framework designed to reduce international money transfer costs for small businesses and promote financial system innovation. CBN Governor Olayemi Cardoso announced the initiative would strengthen financial system infrastructure whilst improving cross-border transaction efficiency for Nigerian enterprises.

According to The Nation Newspaper, the Payment System Vision 2028 focuses on reducing transaction costs that have historically constrained small and medium enterprises' ability to engage in international trade. Current remittance and cross-border payment costs in Nigeria range between 5-10% of transaction values, significantly above the 3% target established by the United Nations Sustainable Development Goals.

The CBN's initiative addresses a critical bottleneck in Nigeria's trade infrastructure, where high payment processing costs have limited SME participation in export markets and reduced competitiveness of Nigerian businesses in regional and global supply chains. The central bank has indicated the new framework will incorporate technological innovations including distributed ledger technology and real-time payment systems to achieve cost reduction targets.

Policy Coordination Challenges

The simultaneous implementation of multiple policy reforms presents coordination challenges for Nigerian authorities as they attempt to balance revenue mobilisation objectives with investment climate improvements. The capital gains tax discussions highlight tensions between fiscal consolidation requirements and the need to maintain competitive investment conditions relative to regional peers including Kenya, Ghana, and South Africa.

Nigeria's current capital gains tax rate stands at 10%, applied to gains from disposal of chargeable assets. Proposed modifications to the framework have not been publicly detailed, though investor concerns suggest potential changes to exemption thresholds, holding period requirements, or rate adjustments that could impact portfolio investment returns.

The government's emphasis on attracting "partners" rather than "speculators" suggests potential differentiation in tax treatment based on investment duration or strategic sector alignment. Such an approach would mirror policies implemented in emerging markets including India and Indonesia, where long-term infrastructure investors receive preferential tax treatment compared to short-term portfolio capital.

The policy reforms unfold against a backdrop of persistent macroeconomic challenges including elevated inflation running above 20%, foreign exchange pressures, and public debt servicing costs consuming approximately 40% of federal revenues. These constraints underscore the urgency of Nigeria's efforts to optimise resource allocation and attract sustainable foreign investment to support economic transformation objectives.

Implementation timelines for the various policy initiatives remain unclear, with authorities yet to provide specific dates for finalisation of capital gains tax negotiations, investment budgeting framework rollout, or Payment System Vision 2028 deployment. Market participants have indicated that clarity on implementation schedules and detailed policy parameters will be critical factors influencing near-term investment decisions in Africa's largest economy.