₦airaland Forum

megawealth01:
Rich people use debt to get richer because debt isn’t taxed. They buy assets and borrow against them tax-free

please explain this to me like a 5 year old. If you take a loan, there's finance cost attached na. Cost of funds is at least 27% levels considering that it's asset backed. If the loan is used to generate income, it'll still be taxed na.. abi? Abeg teach me

Unity bank shareholders were really very selfish today. They couldn't release even 10k units today

the stock can now breathe

Sunrisepebble:
The majority shareholder in Aradel, the PE firm, have sold off their holdings now

Ginalex:
please explain this to me like a 5 year old. If you take a loan, there's finance cost attached na. Cost of funds is at least 27% levels considering that it's asset backed. If the loan is used to generate income, it'll still be taxed na.. abi? Abeg teach me

1. Income vs. Wealth: Understanding the Basics

Ordinary people usually earn income from salaries or wages. Salaries are taxed heavily (in many countries, at rates of 20–40% or higher).

Rich people, however, focus on building wealth (assets like real estate, stocks, businesses, or intellectual property). Wealth can grow in value without being taxed until it is sold.

2. How Debt Comes In

When rich people need money, they don’t usually sell their assets (because selling would trigger taxes like capital gains tax). Instead, they:

1. Buy Assets – e.g., real estate, stocks, or businesses.

2. Borrow Against Assets – They use those assets as collateral to get loans from banks.

Example: If a billionaire owns #100M in stocks, they can borrow #20M from the bank using the stocks as collateral.

3. Why It’s Smart: Loan proceeds (debt) are not considered income, so they are not taxed.

3. Why Debt Isn’t Taxed

Tax laws only tax income (like wages, dividends, or realized capital gains).

A loan is not income, because it has to be repaid. Therefore, if a rich person borrows against their assets, they get cash in hand without a tax bill.

4. Using Debt to Grow Richer

Wealthy people don’t just borrow money to spend it recklessly; they use debt as leverage to grow:

Buy More Assets – e.g., borrow money to buy more property or stocks, which then generate rental income or dividends.

Business Expansion – use loans to scale businesses, increasing long-term wealth.

Lifestyle Spending

Without Selling – they can fund a luxury lifestyle (houses, jets, cars) with loans, while their assets keep appreciating.

5. Extra Benefits

Interest Deductions: In many countries, interest payments on certain types of debt (like business or real estate loans) are tax-deductible, reducing taxes even further.

Asset Appreciation:

Assets like real estate and stocks often grow in value over time, so their wealth increases while they’re borrowing tax-free.

Estate Planning: Some use debt as a way to transfer wealth to heirs while minimizing estate taxes.

6. Practical Example

Suppose a billionaire owns #500M worth of stock in a company:

If they sell #50M of stock - They pay capital gains tax (say 20%) = #10M tax. They’re left with only #40M.

If they borrow #50M from the bank using the stock as collateral → They get the full #50M cash, no taxes due.
Meanwhile, their stock continues to grow in value.

https://open.spotify.com/episode/69REwnnJr7OAJm6lJnVyDJ

A summary of today's trading session on the NGX

zendi:
Hmm, this man is saying the saying of his office. When he is invited to make remarks on taxation, will he tell people that it's punishment?

In nations of public sector transparency, trust and accountability, tax compliance should be a happy Civic obligation.

But, what of the other side, nations perceived to be high on the corruption index, aka lootocracies ?

If you're perfectly sure that your Local Govt Chairman cannot, ever, limit himself to his salary and allowances, it will be painful to the soul handing over your tax for allocation to the tiers of Govt.

Abeg make everybody dey pay tax oo, regardless.

Latest Tax usage from FAAC

Another junk was released today.U go see supply next week as many go dey japa before wonderful rubbish results are released..lol
They go still try push the thing before japa go happen.
How much is jaiz bank again.
Don't be a learner for the game

megawealth01:
Unity bank shareholders were really very selfish today. They couldn't release even 10k units today

Unity bank shares is still suspended I tried to sell my tasere units today.

cocolacec:
Unity bank shares is still suspended I tried to sell my tasere units today.

Drop mandate with your broker manually

ojesymsym:
Morgan has one feature that they do not have, Morgan gives you an immediate estimate of the total cost when you input quantity and price, Stanbic does not however Stanbic allows you to select the duration of days you want your limit price to last, to the best of my knowledge, Morgan will cancel all pending order at the end of the trading day, which means you have to refill an order the next day if it was not fulfilled that day.

In all, they all have their uses. Stanbic is where I do my compounding, because the investment there are mostly from dividends or gains so I tend to indulge more with the dividends that come that secondary income unlike the primary dividend that the first right is for it to be invested.

Interesting breakdown each platform has its quirks. I’ve felt the same way trading stocks different fees, features, and even order rules depending on the app. That’s partly why I moved to BG, where I can trade both crypto and tokenized stocks in one place without juggling multiple dashboards. and i'm currently participating on phase 10 trading club championship to Keeps things simpler for me, while still letting me compound or go short-term when I want.

mikeapollo:
He said Lafarge has been repatriating money from Nigeria to France for over 60 years. So telll me how that was possible if Lafarge came into Nigeria 25 years ago.
It is better he says Lafarge has been repatriating money since they came into Nigeria 25 years ago, not 60years. That is my point

Bro, this is not about Lafarge but the entity. Lafarge is just a name of the entity at a particular point. It has been Wapco.
Even now, it can be changed to Huaxin if the new owners like.
The point here is that, that entity has been in Nigeria for over 60 years and has repatriated money out of Nigeria for most of those years before deciding to have boots on ground.

megawealth01:
1. Income vs. Wealth: Understanding the Basics

Ordinary people usually earn income from salaries or wages. Salaries are taxed heavily (in many countries, at rates of 20–40% or higher).

Rich people, however, focus on building wealth (assets like real estate, stocks, businesses, or intellectual property). Wealth can grow in value without being taxed until it is sold.

2. How Debt Comes In

When rich people need money, they don’t usually sell their assets (because selling would trigger taxes like capital gains tax). Instead, they:

1. Buy Assets – e.g., real estate, stocks, or businesses.

2. Borrow Against Assets – They use those assets as collateral to get loans from banks.

Example: If a billionaire owns #100M in stocks, they can borrow #20M from the bank using the stocks as collateral.

3. Why It’s Smart: Loan proceeds (debt) are not considered income, so they are not taxed.

3. Why Debt Isn’t Taxed

Tax laws only tax income (like wages, dividends, or realized capital gains).

A loan is not income, because it has to be repaid. Therefore, if a rich person borrows against their assets, they get cash in hand without a tax bill.

4. Using Debt to Grow Richer

Wealthy people don’t just borrow money to spend it recklessly; they use debt as leverage to grow:

Buy More Assets – e.g., borrow money to buy more property or stocks, which then generate rental income or dividends.

Business Expansion – use loans to scale businesses, increasing long-term wealth.

Lifestyle Spending

Without Selling – they can fund a luxury lifestyle (houses, jets, cars) with loans, while their assets keep appreciating.

5. Extra Benefits

Interest Deductions: In many countries, interest payments on certain types of debt (like business or real estate loans) are tax-deductible, reducing taxes even further.

Asset Appreciation:

Assets like real estate and stocks often grow in value over time, so their wealth increases while they’re borrowing tax-free.

Estate Planning: Some use debt as a way to transfer wealth to heirs while minimizing estate taxes.

6. Practical Example

Suppose a billionaire owns #500M worth of stock in a company:

If they sell #50M of stock - They pay capital gains tax (say 20%) = #10M tax. They’re left with only #40M.

If they borrow #50M from the bank using the stock as collateral → They get the full #50M cash, no taxes due.
Meanwhile, their stock continues to grow in value.

My question is this
1. The cost of fund for taking the asset backed loan will be at least 27%. Is it cheaper paying finance cost compared to capital gains tax?

2. I want to believe taking a loan is most times not for spending. Most times it is to acquire income generating assets. Will you keep holding the asset for the sake of capital appreciation and capital gains tax avoidance? Only to be okay paying finance cost on the loan? Please explain how you'll be better off

cocolacec:
Unity bank shares is still suspended I tried to sell my tasere units today.

Why do you want to sell now and not later when you can make some more change on it?

* UNITY/PROVIDUS merger....
*N3.18 buyout of UNITY
* OR, you opt for 18 shares of PROVIDUS for 17 shares of UNITY.
** Though subject to relevant stakeholders approval

If you don't have update yet, see it below...
https://financeinafrica.com/news/nigerias-unity-providus-advance-merger/

Ginalex:
My question is this
1. The cost of fund for taking the asset backed loan will be at least 27%. Is it cheaper paying finance cost compared to capital gains tax?

2. I want to believe taking a loan is most times not for spending. Most times it is to acquire income generating assets. Will you keep holding the asset for the sake of capital appreciation and capital gains tax avoidance? Only to be okay paying finance cost on the loan? Please explain how you'll be better off

1. The cost of fund at 27% vs capital gains tax

If you take an asset-backed loan at 27% interest, that means you’re paying ₦27 annually for every ₦100 borrowed.

Capital Gains Tax (CGT) in Nigeria is 10% on the profit when you sell an asset.

On the surface, 27% financing cost looks much more expensive than 10% tax.

👉🏽 But the real comparison depends on:

What the borrowed money is used for:

If you use it to fund an asset or business yielding above 27% ROI, then the loan pays for itself and you still come out ahead.

If the yield is below 27%, then you are worse off compared to just paying capital gains tax and selling.

Timing of payment:

With a loan, you don’t sell the asset, so you keep enjoying potential future appreciation.

With CGT, once you sell, the asset (and its future growth potential) is gone forever.

So — if your asset is appreciating at, say, 40% annually, then paying 27% finance cost is still better than selling and paying 10% CGT (because you keep the compounding gains on the full value).

2. Loans aren’t usually for spending but for acquiring income-generating assets

You’re absolutely right — the wealthy don’t usually borrow just to “spend”; they borrow to leverage:

Borrow against assets → free up cash → buy more assets (real estate, businesses, investments).

The original asset keeps appreciating, and the new asset generates cash flow to help service the loan.

This way, they expand their balance sheet without ever selling, meaning they legally avoid triggering capital gains tax.

3. Holding assets vs paying finance costs

Here’s the trade-off:

If you sell the asset:

Pay 10% CGT.

Lose future appreciation.

Lose collateral you could have used to borrow again.


If you borrow against the asset:

Pay interest (27% in your case).

Keep the appreciating asset.

Potentially use the borrowed funds to buy something that generates more than 27%.

So when are you better off?

If the expected return > cost of borrowing (27%), borrowing is better.

If the expected return < 27%, selling and paying CGT is cheaper.

If you need short-term liquidity, but believe in long-term asset growth, borrowing helps you avoid losing out on future appreciation

Ginalex:
My question is this
1. The cost of fund for taking the asset backed loan will be at least 27%. Is it cheaper paying finance cost compared to capital gains tax?

2. I want to believe taking a loan is most times not for spending. Most times it is to acquire income generating assets. Will you keep holding the asset for the sake of capital appreciation and capital gains tax avoidance? Only to be okay paying finance cost on the loan? Please explain how you'll be better off

Like you, I find the suggestion of taking loans to avoid tax confusing especially in the Nigerian context.
But it's clear to me when I think of developed countries like UK, US.
Imagine taking a loan of 4% and then putting that in S&P 500 which has grown 11% for past 10 years.

Wealthy people never pay off their loans, they just keep accumulating more loans for their daily expenses at say 4% and use their equity/shares as collateral.
Essentially, your debt grows 4%, while your wealth grows 11%. Best part is you pay zero taxes since loan is not taxable.

https://www.youtube.com/watch?v=R0qF-CNJZJ0


A summary of today's trading session on the NGX.

Price may never see sub N500

Sunrisepebble:
The majority shareholder in Aradel, the PE firm, have sold off their holdings now

megawealth01:
1. The cost of fund at 27% vs capital gains tax

If you take an asset-backed loan at 27% interest, that means you’re paying ₦27 annually for every ₦100 borrowed.

Capital Gains Tax (CGT) in Nigeria is 10% on the profit when you sell an asset.

On the surface, 27% financing cost looks much more expensive than 10% tax.

👉🏽 But the real comparison depends on:

What the borrowed money is used for:

If you use it to fund an asset or business yielding above 27% ROI, then the loan pays for itself and you still come out ahead.

If the yield is below 27%, then you are worse off compared to just paying capital gains tax and selling.

Timing of payment:

With a loan, you don’t sell the asset, so you keep enjoying potential future appreciation.

With CGT, once you sell, the asset (and its future growth potential) is gone forever.

So — if your asset is appreciating at, say, 40% annually, then paying 27% finance cost is still better than selling and paying 10% CGT (because you keep the compounding gains on the full value).

2. Loans aren’t usually for spending but for acquiring income-generating assets

You’re absolutely right — the wealthy don’t usually borrow just to “spend”; they borrow to leverage:

Borrow against assets → free up cash → buy more assets (real estate, businesses, investments).

The original asset keeps appreciating, and the new asset generates cash flow to help service the loan.

This way, they expand their balance sheet without ever selling, meaning they legally avoid triggering capital gains tax.

3. Holding assets vs paying finance costs

Here’s the trade-off:

If you sell the asset:

Pay 10% CGT.

Lose future appreciation.

Lose collateral you could have used to borrow again.


If you borrow against the asset:

Pay interest (27% in your case).

Keep the appreciating asset.

Potentially use the borrowed funds to buy something that generates more than 27%.

So when are you better off?

If the expected return > cost of borrowing (27%), borrowing is better.

If the expected return < 27%, selling and paying CGT is cheaper.

If you need short-term liquidity, but believe in long-term asset growth, borrowing helps you avoid losing out on future appreciation

what if the opposite happens, because there's no guarantee that appreciation is a must. Maybe abroad, the idea of taking loan to avoid paying capital gains tax might work but I struggle to understand how it's advantageous here ...

P.s I used margin loans to trade in this past where I see a rare opportunity to take advantage of but was constrained by liquidity at the time, which I've already liquidated. Margin loans aren't that cheap especially if you aren't expecting an inflow to quickly paydown.

Adapt or d1e!! If slow to adapt SP shall suffer!

Ginalex:
what if the opposite happens, because there's no guarantee that appreciation is a must. Maybe abroad, the idea of taking loan to avoid paying capital gains tax might work but I struggle to understand how it's advantageous her ...

P.s I used margin loans to trade in this past where I see a rare opportunity to take advantage of but was constrained by liquidity at the time, which I've already liquidated. Margin loans aren't that cheap especially if you aren't expecting an inflow to quickly paydown.

Read my thoughts again. The pros and cons are detailed sha

Olaide1295:
Like you, I find the suggestion of taking loans to avoid tax confusing especially in the Nigerian context.
But it's clear to me when I think of developed countries like UK, US.
Imagine taking a loan of 4% and then putting that in S&P 500 which has grown 11% for past 10 years.

Wealthy people never pay off their loans, they just keep accumulating more loans for their daily expenses at say 4% and use their equity/shares as collateral.
Essentially, your debt grows 4%, while your wealth grows 11%. Best part is you pay zero taxes since loan is not taxable.

Thank God I'm not alone

We've actually talked about this loan vs tax situation in the past.

The maths is straight forward: the cost of the loan needs to be lower than the potential tax rate for it to make sense. The lower cost is the attraction.


In advanced economies, loans are priced below 5% while taxes are often above 20% so there's a 15+% positive spread in favour of debt.


In Nigeria, prime lending is above 30%, when you add 1% management fees and other sundry fees, it could be nearing 32%

I have personally paid 156% annualized this year with Oxygen X, and I still even pay over 80% with Renmoney (long story)

So prime lending at 32% , average effective tax rate at about 22% implies a 10% negative spread against loans. So taking loans is worse here!

That's just the simple maths.


Except they've changed the meaning of "greater than", "less than" 😁😁😁

chimex38:
Latest Tax usage from FAAC

What a judicious usage

So, off to Instanbul just to master the art of rendering wifely support to their Chairmen husbands.
This one is more than wastefulness.
It's a grave insult to taxpayers.

But this thing cuts accross the entire public service, and not limited to Loc Govts, which I cited only as an example.
Have you heard how an unknown person dumped $7M in the vault of a Lagos branch of Providus?

Seven Million Dollars cash for God's sake, let me write it out in full. As at the last I heard, EFCC was still looking for the unknown looter, suspected to be a govt official. Meanwhile the loot has been seized by Govt

Taxpayers have many reasons to be angry in this country.

awesomeJ:
We've actually talked about this loan vs tax situation in the past.

The maths is straight forward: the cost of the loan needs to be lower than the potential tax rate for it to make sense. The lower cost is the attraction.


In advanced economies, loans are priced below 5% while taxes are often above 20% so there's a 15+% positive spread in favour of debt.


In Nigeria, prime lending is above 30%, when you add 1% management fees and other sundry fees, it could be nearing 32%

I have personally paid 156% annualized this year with Oxygen X, and I still even pay over 80% with Renmoney (long story)

So prime lending at 32% , average effective tax rate at about 22% implies a 10% negative spread against loans. So taking loans is worse here!

That's just the simple maths.


Except they've changed the meaning of "greater than", "less than" 😁😁😁

Why getting loans from Renmoney and Oxygen X, when you can get cheaper loans from United Capital and Orange One Finance

3.5% interest per month is crazy

zendi:
What a judicious usage

So, off to Instanbul just to master the art of rendering wifely support to their Chairmen husbands.
This one is more than wastefulness.
It's a grave insult to taxpayers.

But this thing cuts accross the entire public service, and not limited to Loc Govts, which I cited only as an example.
Have you heard how an unknown person dumped $7M in the vault of a Lagos branch of Providus?

Seven Million Dollars cash for God's sake, let me write it out in full. As at the last I heard, EFCC was still looking for the unknown looter, suspected to be a govt official. Meanwhile the loot has been seized by Govt

Taxpayers have many reasons to be angry in this country.

Ahhh.. This is a serious sth that's becoming just a joke..
How can he amaze such cash and wasn't even flagged digitally or otherwise for explanation or so. Even if na withdrawals from multiple sources.

Over ₦10.5bn!!
Damn

zendi:
What a judicious usage

So, off to Instanbul just to master the art of rendering wifely support to their Chairmen husbands.
This one is more than wastefulness.
It's a grave insult to taxpayers.

But this thing cuts accross the entire public service, and not limited to Loc Govts, which I cited only as an example.
Have you heard how an unknown person dumped $7M in the vault of a Lagos branch of Providus?

Seven Million Dollars cash for God's sake, let me write it out in full. As at the last I heard, EFCC was still looking for the unknown looter, suspected to be a govt official. Meanwhile the loot has been seized by Govt

Taxpayers have many reasons to be angry in this country.

Exactly.
I support them being angry.
Guaranteed judicious use of resources as good as 85%-90% will be a good one. But even our National Budget hasn't been implemented that high to the letter. How much more tax?

emmanuelewumi:
Why getting loans from Renmoney and Oxygen X, when you can get cheaper loans from United Capital and Orange One Finance

3.5% interest per month is crazy

It's cos those ones just give based on credit report and bank account cash flow. No security required at all. Simple and fast.

United capital wanted me to move to their brokers, but paying 1% brokerage fees would even cost me more. Like extra 0.5% on N300m monthly trades is extra 1.5m in brokerage fees.


Anyways, the whole loan situation was due to a heavy real estate project that drained my liquidity, I have cut them way down now since my liquidity has improved significantly.


But if I see a 5% monthly offer, I'll certainly still take it. Cos I need to hit 0.2% of all retail trades soon 😁😁😁.

I love the market like that.

chimex38:
Ahhh.. This is a serious sth that's becoming just a joke..
How can he amaze such cash and wasn't even flagged digitally or otherwise for explanation or so. Even if na withdrawals from multiple sources.

Over ₦10.5bn!!
Damn

Part of the horror is how somebody is about to forfeit this size of loot.

What could be the gravity of the underlying crime ?

I hope Corruption is not a Nigerian.



https://www.tvcnews.tv/court-orders-forfeiture-of-7m-found-in-providus-bank-vaults/

zendi:
https://www.tvcnews.tv/court-orders-forfeiture-of-7m-found-in-providus-bank-vaults/

Fear of EFCC, all of a sudden it has become "mystery cash".
Dat Kain "mystery"


That's how I also learnt on twitter that NNPCL that has 49% stake in LNG as Nigerian LNG , created an offshore entity in Caymans island and registered the entity as NNPC LNG with an undisclosed part of percentage of the 49% called "equity LNG".
Reason?
To avoid tax(which is legal anyway).
1)But then, isn't the tax they are running from accruing to the same FG? Why run?

2)But it raises the question of transparency in their report.

3) Dividend from that portion of NLNG doesn't return to the federation account.

Any advantage for this?
I don't buy the tax idea.
It's looking like FG is a proxy for some kind of deals.

and if the tax avoidance is true, why encourage Nigerians to pay tax if FG dey run From tax?

https://x.com/realkelvin07/status/1970377693200818299

awesomeJ:
It's cos those ones just give based on credit report and bank account cash flow. No security required at all. Simple and fast.

United capital wanted me to move to their brokers, but paying 1% brokerage fees would even cost me more. Like extra 0.5% on N300m monthly trades is extra 1.5m in brokerage fees.


Anyways, the whole loan situation was due to a heavy real estate project that drained my liquidity, I have cut them way down now since my liquidity has improved significantly.


But if I see a 5% monthly offer, I'll certainly still take it. Cos I need to hit 0.2% of all retail trades soon 😁😁😁.

I love the market like that.

Please who audits, gives or issues credit report?
Deposit money banks of one's account or official specialised agencies?

chimex38:
Please who audits, gives or issues credit report?
Deposit money banks of one's account or official specialised agencies?

There are credit bureaus like CRC.
Banks may also have their internal algorithms.

megawealth01:
1. The cost of fund at 27% vs capital gains tax

If you take an asset-backed loan at 27% interest, that means you’re paying ₦27 annually for every ₦100 borrowed.

Capital Gains Tax (CGT) in Nigeria is 10% on the profit when you sell an asset.

On the surface, 27% financing cost looks much more expensive than 10% tax.

At the bolded, it is not “looks much more expensive”. it is for a fact much more expensive.

Where what you are mentioning works effectively are 1st world countries where interest rates are so low (US - 4.25%, UK - 4%….). I would never advise anybody to take loan and buy stocks in “Nigeria”. For business where your RoI is more than 27%? Its between “Maybe” and “Yes” cuz you are slaving for your creditor.

It is good to be vast in knowledge but sometimes we forget the purpose of this enlightenment, it is not just to follow blindly.

I would advise, for the Nigerian environment ehn, be very knowledgeable then write your own playbook to fit the environment. Cuz if Adam Smith was born in Nigeria, half of what he wrote would have never seen light of the day. Nigeria’s economy would invalidate them

Final bullet: don’t forget the “rule of 72” 72/27 = 2.67 years. Meaning what ever amount you take as loan at 27%, would double in 2.67 years (ie 50 million becomes 100 million in just 2.67 years). That is not a small burden if you ask me.