Impact of VAT Exemption on commissions related to capital market transactions


Monday, November 10, 2014 2.52 PM / THEaNALYST


The Nigerian government has amended the VAT “Services Exempt” list to include commissions related to capital markets. This is specifically in respect of:



  Commissions earned on traded value of the shares

  Commissions payable to the Securities and Exchange Commission (SEC)

  Commissions payable to the Nigerian Stock Exchange (NSE)

  Commissions payable to the Central Securities Clearing System (CSCS) 


This in effect reduces the cost of trading on the Nigerian stock exchange, since till now all the commissions came under the VAT bracket, meaning that the investors had to pay this additional amount. Now, retail investors can avail the benefit of reduced commissions, and this is likely to improve sentiment in investing in the markets.

It was estimated that on an average traded volume on the NSE was 282 Mn shares per day in Oct 2014, which roughly translated into ~N25 Mn in VAT costs. This is the savings for investors, and other institutions such as stock brokers can save on compliance costs as well.

In our view, this is a much needed step to encourage more retail participation in the markets, and given the recent bear hug that the markets have been under, any good news is welcome. We believe that this is likely to encourage more retail participation, and once the current volatility in the markets reduces, we feel that the stock markets will get back on their upward run.


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