The Utica Film Fund Stands Out as a Strategic Choice.
The Nigerian equities market has entered a defining period following the announcement of the new Capital Gains Tax (CGT) framework, set to take effect on 1 January 2026. The reform triggered one of the sharpest single-day declines in more than a decade, with the NGX All-Share Index (NGX-ASI) falling by 5.01 percent as investors reacted to uncertainty surrounding its implementation and the potential impact of taxation on investment returns.
Subsequent clarifications from the Fiscal Policy and Tax Reforms Committee, particularly regarding grandfathering and the cost-base reset, have helped restore stability. As investors reposition ahead of the effective date, the revised CGT regime is expected to shape trading behaviour, liquidity flows, and sentiment across the NGX for the remainder of 2025. During this transition, new opportunities are emerging not only within listed equities but also in alternative assets such as the Utica Film Fund, which is uniquely positioned to benefit from the tax reform in ways that many traditional investment vehicles cannot.
Restored Confidence After a Turbulent Start
Initial reactions to the CGT announcement were characterised by uncertainty. Investors were unsure about cost-base calculations, the deductibility of trading expenses, and the risk of retroactive taxation. These concerns eased after authorities clarified that:
- Gains earned on or before 31 December 2025 will be taxed under the old 10% flat rate, regardless of when disposal occurs.
- Cost bases will be reset to the higher of the original purchase price or the market value as at 31 December 2025.
This clarity removed fears of historical gains falling under the new progressive rates and helped restore market confidence, setting a more constructive tone toward year-end.
What Is Grandfathering?
“Grandfathering” (or a “grandfather clause”) is a legal/tax concept where certain prior rights or conditions are preserved when a new rule or law comes into effect. In practice, it means that people (or assets) that existed under the old regime are “grandfathered in” so they’re not fully subject to the new rules or at least for some aspect of it.
Surge in Tax-Motivated Buying Expected Through December
The grandfathering mechanism creates strong incentives for investors to increase their exposure to equities before year-end. Any gains accumulated in 2025 will permanently enjoy the old 10 percent CGT regime. As a result, greater accumulation is expected across banking, telecom, industrial, and high-liquidity blue-chip stocks. These inflows are likely to support a mildly bullish market trend throughout December as investors position for favourable tax treatment.
Stabilisation Driven by Cost-Base Reset
The cost-base reset has meaningfully reduced anxiety about gains accumulated during recent market rallies. By ensuring that no investor is charged CGT on pre-2026 gains:
- Forced selling is avoided,
- Portfolio managers can rebalance without fear of retroactive taxation, and
- Price movements are likely to remain rational and volume-driven.
This clarity has already contributed to renewed buying after the November sell-off and is expected to sustain healthy activity into year-end.
Portfolio Rebalancing and Dividend Positioning
December is traditionally a period of active portfolio realignment. Asset managers aim to close the year with strong performance metrics, position ahead of fourth-quarter earnings, concentrate in dividend-paying stocks, and take advantage of market inefficiencies and window dressing. Following recent valuation declines, the month presents an appealing entry point for investors seeking both dividend income and capital appreciation.
Sectoral Implications Banking and Telecoms Lead
The banking sector remains the favourite due to its combination of high dividend yields, attractive valuations, strong liquidity, and continued institutional demand. Telecom companies are also expected to maintain steady interest thanks to their defensive earnings profile and robust fundamentals. Cement and industrial stocks may benefit from increased government spending, while consumer goods companies offer defensive appeal as they continue a gradual recovery.
Foreign Investor Behaviour Cautious but Not Bearish
Foreign portfolio investors remain alert to changes in the tax environment and fluctuations in the foreign exchange market. However, recent policy clarifications have reduced panic. Most foreign investors are expected to maintain a neutral to slightly positive stance through December, especially as domestic investor sentiment improves.
Risks to Watch
Key risks include possible delays in the release of final CGT guidelines, renewed FX volatility, rounds of profit-taking by domestic investors, and global macroeconomic headwinds. Even so, these risks are unlikely to outweigh the strong domestic incentives that continue to drive participation in the Nigerian market.
December 2025 Outlook Mildly Bullish With Upside Potential
The base case points to a moderate rally of between 2 and 5 percent, supported by domestic inflows. A more optimistic scenario could see gains of 6 to 10 percent if institutional accumulation intensifies and macroeconomic conditions remain stable. A mild downside scenario, involving a decline of 1 to 3 percent, could occur if profit-taking or FX pressures increase. Overall, the outlook for December leans mildly bullish.
Why the Utica Film Fund Is a Strategic Choice for Investors Now and Into the Future
While the NGX offers attractive opportunities, the new CGT reform enhances the appeal of private investment vehicles such as the Utica Film Fund. This positions the fund as both a complement and an attractive alternative to equities during this period of tax transition.
Investors who enter the fund before 31 December 2025 gain meaningful tax benefits. All gains earned this year will be taxed under the grandfathered 10 percent regime, while the cost-base reset ensures that no historical gains fall under the new progressive rates. This maximises tax efficiency for early investors and strengthens long-term return potential.
Strong Positioning Even Under the 2026 Rules
The fund remains compelling once the new rules take effect. Many gains from film investment fall within exemption thresholds, reinvested gains can qualify for 0 percent CGT if deployed within twelve months. These factors make the fund inherently more tax efficient than many traditional assets that may be taxed at higher rates.
Non-Correlated Asset Class Offering Stable Returns
Nigeria’s film industry is one of the country’s fastest expanding sectors, supported by strong domestic viewership, growing international streaming opportunities, and rising investment in production infrastructure. Because film revenues are not directly tied to equity market cycles, the Utica Film Fund provides valuable diversification benefits.
Attractive Long-Term Growth Potential
Investors are positioned to benefit from the rising global demand for African content, increasing government support for creative industries, and the expanding cinema and digital distribution landscape in Nigeria. These structural tailwinds support steady returns and long-term appreciation.
Ideal for Investors Seeking Both Growth and Stability
The fund’s tax efficiency, diversification benefits, consistent cash-flow potential, long-term industry momentum, and reduced sensitivity to market volatility make it an attractive choice for investors navigating current uncertainties while pursuing stable, forward-looking opportunities.
Conclusion
The new CGT reform is reshaping investor activity on the Nigerian Exchange, making December 2025 a period of opportunity rather than uncertainty. Clarity surrounding grandfathering and the cost-base reset has revitalised investor confidence, positioning the NGX for a mildly bullish close to the year. At the same time, the Utica Film Fund stands out as a strategic investment vehicle, uniquely aligned with both the tax advantages and industry growth prospects emerging from the reform. For investors seeking a blend of tax efficiency, diversification, growth potential, and long-term stability, the fund offers a timely and highly compelling option heading into 2026 and beyond.
- The author is the fund manager of the Utica Film Fund.