Nigeria’s mergers and acquisitions (M&A) market experienced its steepest decline in nearly a decade during the first half of 2026, with deal value plunging 88.9% year-on-year to $105.8 million, according to DealMakers Africa’s latest report. The collapse coincided with the full implementation of the country’s new tax regime, which raised the effective capital gains tax rate from 10% to 30% by integrating capital gains into the corporate income tax framework. This shift has intensified pressure on dealmakers, complicating transaction pricing and increasing exit costs for investors.
The tax overhaul, effective January 1, 2026, has particularly impacted private equity firms, whose returns rely on favorable exit valuations. Analysts warn that the higher tax burden could widen the gap between seller expectations and buyer offers, potentially stalling deals. Abiodun Keripe, managing director of Afrinvest Consulting, noted that the tax change may not halt transactions but could alter their structure and pricing. “Sellers may demand higher valuations to offset the tax, while buyers might resist, making deals appear less attractive,” he said.
Ayokunle Olubunmi, head of financial institutions ratings at Agusto & Co., emphasized the tax’s indirect role in the M&A slump. “While not the sole factor, the capital gains tax adds uncertainty to an already challenging market,” he stated. Despite the decline, Nigeria recorded 39 M&A transactions in H1 2026—up from 31 in the same period in 2025—highlighting continued investor interest, albeit with reduced capital allocation per deal.
The country’s M&A ranking on the continent also fell sharply, dropping to ninth in H1 2026 from its previous position as Africa’s top market by value. Kenya overtook Nigeria, attracting $1.44 billion in deal value from 25 transactions. Across Africa, excluding South Africa, M&A value fell 10% year-on-year to $5.58 billion, with deal volume declining 13% to 166 transactions. Nigeria’s 88.9% drop was far steeper than the regional average.
Analysts caution against attributing the decline solely to the tax regime. Olubunmi noted that private equity’s contribution to Nigeria’s M&A activity—$91.7 million in H1 2026, down from $127.4 million in 2025—was not significant enough to explain the scale of the overall drop. “The tax is one of several factors, including naira volatility, repatriation challenges, and political uncertainty,” he said.
Despite these hurdles, Nigeria’s M&A market remains a target for investors. However, the combination of higher exit taxes and economic instability is making large transactions increasingly difficult to price and execute. The sector’s future hinges on how stakeholders navigate these pressures while balancing regulatory changes and market dynamics.
The evolving landscape underscores the need for clarity and stability to restore investor confidence. As dealmakers adapt to the new tax environment, the focus will remain on mitigating risks and ensuring sustainable growth in Nigeria’s M&A sector.
The decline reflects broader economic headwinds, including a weakening naira, energy costs, and geopolitical uncertainties. These factors, coupled with the tax regime, have created a complex environment for investors weighing opportunities in Africa’s third-largest economy.
While the immediate outlook remains challenging, the resilience of Nigeria’s M&A market suggests potential for recovery. Analysts emphasize the importance of policy coherence and market transparency to attract capital and revive transaction activity.
The situation highlights the delicate balance between regulatory reforms and economic incentives. As Nigeria seeks to reassert its position in Africa’s M&A landscape, the interplay of tax policy, investor sentiment, and macroeconomic conditions will shape its trajectory.
Nigeria’s M&A sector continues to attract attention, but the path to recovery requires addressing both structural and cyclical challenges. The coming months will test the adaptability of dealmakers and the effectiveness of measures to stabilize the market.
The new tax regime, while a significant factor, is part of a broader narrative of economic adjustment. Stakeholders must navigate these complexities to ensure that Nigeria’s M&A market remains a viable and attractive destination for investment.
The ongoing evolution of Nigeria’s M&A landscape underscores the importance of proactive strategies to mitigate risks and capitalize on emerging opportunities. As the market adapts, the focus will remain on fostering an environment conducive to sustainable growth and investor confidence.
The interplay of tax policy, economic conditions, and investor behavior will determine the pace of recovery. For now, the sector remains a barometer of Nigeria’s broader economic resilience and its ability to attract and retain capital in a competitive regional market.
The challenges facing Nigeria’s M&A market are emblematic of the broader economic adjustments required to sustain growth. Addressing these issues will be critical to restoring investor confidence and repositioning the country as a key player in Africa’s M&A ecosystem.