Investors Lament Resumption of 5% VAT on NSE Transactions

By Dipo Olowookere

Some investors in the Nigerian Stock market have expressed dissatisfaction with the resumption of 5 percent Value Added Tax (VAT) commission to be charged on all transactions executed at the exchange from Wednesday, July 24, 2019.

Business Post recalls that on July 25, 2014, the federal government, through the then Minister of Finance and Coordinating Minister of the Economy, Mrs Ngozi Okonjo-Iweala, commenced the exemption of VAT payment on all NSE transactions. This exemption had a lifespan of five years, which lapses on July 24, 2019.

Already, some stockbrokers have been sending notifications to their clients, informing them that from next week, they will begin to pay extra amount of money for transactions carried out on their behalf.

“Please be notified that Value Added Tax (VAT) on commissions will now be charged on transactions conducted on the Nigerian Stock Exchange (NSE).

“The order for exemption of VAT from all NSE transactions was granted by the Coordinating Minister of the Economy and the Honourable Minister of Finance in 2014. The order became effective on the 25th July 2014 for a 5 -year period, which expires on the 24th July, 2019.

“In this regard, all dealing members of the Nigerian Stock Exchange have been notified to resume charging of VAT on all NSE transactions effective 25th July 2019.

“Subsequently, a 5% VAT on brokerage commission earned, NSE fees and CSCS fees will be restored effective 25th July 2019.

“Thank you for your valued patronage,” a notice sent to investors by one of the stockbrokers in Lagos and obtained by Business Post said.

The NSE had in a circular dated July 10, 2019 and titled NSE/RD/BDR/CIR5/19/07/10 informed stockbrokers of the resumption of the VAT payment.

“Please refer to our circular with reference BDR/CIR/GOI/10/14 dated 27 October 2014 on the above subject matter (attached as Appendix A); and the Value Added Tax (VAT) Exemption of Commissions on Stock Exchange Transactions Order (Order) granted by the Coordinating Minister for the Economy and Honourable Minister of Finance in 2014. (See, Official Gazette of the Federal Republic of Nigeria: No. 95, Vol. 101 issued on 30 July 2014).

“The Order which became effective on 25 July 2014 is valid for a period of five (5) years, and thus the exemption granted in the Order is set to expire on 24 July 2019.

“To that extent, all Dealing Members of the Nigerian Stock Exchange are to note that effective 25 July 2019, barring any further extensions from the Federal Government:

“i. VAT is to be charged on all commissions applicable to capital market transactions. These are commissions: a. earned by Dealing Members on traded values of shares; and b. payable to The Nigerian Stock Exchange (NSE) and the Central Securities Clearing System Plc. (CSCS);

“ii. The CSCS will automate the deduction of VAT charged on commissions payable to The NSE and the CSCS; and

“iii. Dealing Members are required to resume the deduction of VAT on commissions earned.

“Consequently, Dealing Members are required to engage their software vendors for the automation of VAT deductions, and communicate to their clients the above ahead of the effective date.

“Furthermore, Dealing Members are reminded to ensure that the VAT charged on the commissions earned are remitted to the Federal Inland Revenue Service (FIRS) as and when due; and that the corresponding evidence of remittance is retained for future reference,” the circular from the NSE last week had stated.

However, some investors are calling for an extension of the five percent VAT exemption, saying it would further encourage more people to consider joining the stock market at this moment.

Business Post reports that in 2014, when the federal government introduced the initiative, it was to encourage more investors into joining the capital market.

But some investors want this to continue for another five or three years.

“Government should consider extending the VAT exemption for another five or three years. The present state of the economy in Nigeria is not encouraging investment and if this exemption is not restored, I can guarantee you that more people will exit the market,” an investor at the stock market, who identified herself as Modupe Adediran, informed our correspondent.

“Since I received the notification from my stockbroker last week, I have been in a thinking mode. I cannot just imagine paying 5 percent tax on any transaction I execute in the trading of shares in my portfolio. The NSE should just fight for us by convincing the federal government to extend the exemption for another period,” another investor, who asked not to be named, told Business Post on Monday.

An official of one of the leading stockbrokers in the country, who begged for anonymity, said their hands were tied on this issue.

“There is nothing we can actually do concerning this matter because we received a circular to adhere to the directive. The best we can do to attract more investors or clients is to slightly reduce what we charge as commission. Asides that, there is nothing we can do,” the official said.

Business Post learned that the exemption can remain for another period except President Muhammadu Buhari appoints a Minister of Finance, which is likely not possible before July 24 because such person would have to be screened and confirmed by the Senate.

However, when a Finance Minister is eventually appointed by the President, the exemption can still be brought back.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via

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