Nigeria’s new tax regime is adding to the pressure on dealmakers, raising the cost of exits and complicating transaction pricing just as mergers and acquisitions in the West African country suffer their sharpest decline in at least nine years.
M and A deal value in Africa’s third-largest economy plunged 88.9 percent year-on-year to $105.8 million in the first half of 2026, its lowest level in nearly a decade, according to DealMakers Africa’s latest H1 deal report.
The collapse came in the first full half-year under Nigeria’s new tax regime, which took effect on January 1 and raised the effective capital gains tax rate applicable to companies from 10 percent to 30 percent by bringing capital gains into the corporate income tax framework.
The higher tax burden is particularly significant for private equity investors, whose returns depend on existing investments at attractive valuations. It can also widen the gap between what sellers expect to receive and what buyers are willing to pay, potentially making some transactions harder to close.
Yet the tax change is not the only explanation for the collapse in deal value. Africa’s most populous nation recorded 39 M and A transactions in H1 2026, up from 31 a year earlier and the highest number of deals among African markets.
The divergence between deal volume and value signals that investors remain interested in Nigeria but are committing significantly less capital to individual transactions, with the tax regime adding another layer of uncertainty to an already challenging market.
‘It may not necessarily prevent transactions from happening, but it can influence how transactions are structured and priced,’ said Abiodun Keripe, managing director of Afrinvest Consulting.
He said the additional tax burden could make sellers demand higher valuations to preserve their returns, while buyers may be unwilling to meet those expectations.
‘When this is factored into M and A valuations, the transaction can start to look expensive and lower internal rate of returns,’ said Ayokunle Olubunmi, head of financial institutions ratings at Agusto and Co.
For private equity investors, the issue is particularly important because the higher tax burden affects the economics of eventual exits.
‘One of the things that PE investors have always considered is their exits,’ Olubunmi said. ‘So there is no way you can look at the new capital gains tax without considering its potential impact on those exit decisions.’
The concern comes as Nigeria’s position in Africa’s M and A market deteriorates sharply.
The country, which ranked as Africa’s leading M and A market by value in H1 2021, H1 2022, H1 2024 and H1 2025, fell to ninth place in H1 2026.
Kenya overtook Nigeria as the continent’s largest M and A market by value, attracting $1.44 billion from 25 transactions.
Across Africa, excluding South Africa, M and A value fell about 10 percent year-on-year to $5.58 billion, while deal volume declined approximately 13 percent to 166 transactions.
Nigeria’s 88.9 percent decline was therefore significantly steeper than the broader African slowdown.
Still, analysts caution against attributing the collapse in Nigeria’s M and A value to the tax regime alone.
‘I don’t think capital gains tax was the major factor behind the decline in M and A activity,’ Olubunmi said. ‘Private equity contributes to a portion of total M and A activity in Nigeria, but the decline in private equity was not significant enough to explain the scale of the overall drop. So I would see capital gains tax as one of several factors rather than the main driver.’
Private equity accounted for about $91.7 million of Nigeria’s H1 M and A value, down from $127.4 million a year earlier but above the $52.5 million recorded in H1 2024.
For dealmakers, the tax change is therefore less about shutting down transactions than changing the economics of doing business.
With the naira, repatriation of returns, valuations and political uncertainty already weighing on investment decisions, the higher capital gains tax risks making large transactions even harder to price and execute.
Nigeria’s M and A market is still attracting investors – but the combination of higher exit taxes and greater uncertainty is making the market increasingly difficult for large-ticket deals.