Mergers & Acquisitions deals face different tax bills under Nigeria’s new regime

Companies planning mergers, acquisitions, or corporate restructuring will have to pay closer attention to how they structure transactions as Nigeria’s tax reform creates different tax outcomes for different deal structures.

Yvonne Afolabi, a transfer pricing expert, said the increase in capital gains tax (CGT) from 10 percent to 30 percent makes taxable disposals and certain outright asset sales more expensive, while qualifying mergers and restructurings can benefit from tax relief.

“In practice, this could encourage companies to consider restructuring options more carefully rather than automatically pursuing an outright disposal,” Afolabi said.

The Nigeria Tax Act 2025, which took effect on January 1, 2026, brought capital gains into the corporate income tax framework, meaning assessable gains from the disposal of chargeable assets, including shares, are now taxed at the applicable 30 percent rate.

However, the treatment differs depending on how a transaction is structured.

Under the Act, a qualifying merger is treated as a continuation of the existing businesses rather than a cessation. Assets transferred in the merger do not give rise to chargeable gains and are deemed to move at their tax written-down value. Unutilised capital allowances, tax credits, and unabsorbed losses can also remain available, subject to the prescribed conditions.

Akinjide Akande, group head of Access Bank, said the rules do not make mergers and acquisitions less attractive but require companies to structure transactions efficiently so the resulting entity is not worse off.

“When two or more entities merge, the NTA treats the merger as a continuation, rather than a cessation of one or the other,” Akande said.

He said assets, tax losses, unutilised capital allowances, and unused withholding-tax credits can be transferred to the resulting entity.

“Capital gains tax also does not apply because there’s no disposal,” he said.

The distinction becomes more significant where a transaction is structured as a sale or transfer of a business that results in cessation. In such cases, the old business is treated as having ended, and its unused tax attributes may not transfer to the acquiring entity.

This means two transactions with a similar commercial objective can produce different tax outcomes depending on whether they are structured as a merger, business transfer or asset transfer.

“Companies will need to consider the commercial rationale, eligibility for the merger relief, tax attributes, regulatory requirements, and the overall transaction cost, not just the headline CGT rate,” Afolabi said.

The implications extend to companies involved in cross-border transactions. The Act brings certain indirect transfers of shares into the Nigerian tax net where an offshore transaction results in a change in the ownership structure of a Nigerian company or an interest in Nigerian assets.

For multinational companies, this means selling an offshore holding company with significant value derived from Nigerian assets can potentially create a Nigerian tax liability.

The rules come as Nigerian companies continue to undertake major restructuring and investment decisions, particularly in banking, oil and gas and other capital-intensive sectors.

For banks, the issue is particularly relevant as lenders have been raising capital and considering consolidation options under the Central Bank of Nigeria’s recapitalisation programme.

The broader effect of the tax reform, however, may not be a simple increase or decrease in M&A activity.

Instead, companies may become more deliberate about whether to sell a business outright, acquire its shares, transfer selected assets or combine operations through a qualifying merger.

The law also requires businesses to notify the relevant tax authority before restructuring a trade, business, profession, or vocation, adding a compliance requirement to the transaction process.

For corporate boards and finance teams, tax is therefore becoming part of the decision on how a transaction is executed, rather than simply a cost calculated after the commercial terms have been agreed.