Nigerians buying petrol may have to pay an extra ₦45 per litre beginning January 2026 if pump prices remain at the current average of ₦900, following the introduction of a five percent surcharge on refined fossil fuel products under the new Nigeria Tax Administration Act.
The surcharge is part of four new tax reform laws signed by President Bola Tinubu on June 26, 2025, with implementation scheduled for 2026. The policy, aimed at discouraging fossil fuel consumption and promoting clean energy, will cover petrol, diesel, aviation fuel, and other refined petroleum products. However, household kerosene, cooking gas, Compressed Natural Gas (CNG), and renewable energy products are exempt.
According to the law, the five percent surcharge will apply to every “chargeable transaction” involving fossil fuels, including supply, sale, or payment, whichever occurs first. It will be computed based on the retail price of the product. The Federal Inland Revenue Service—soon to be renamed the Nigeria Revenue Service—is mandated to administer and collect the surcharge monthly.
A section of the Act reads: “A surcharge is imposed at five percent on chargeable fossil fuel products provided or produced in Nigeria and shall be collected at the time a chargeable transaction occurs. Surcharge shall be computed based on the retail price of all chargeable fossil fuel products.”
However, the law leaves room for flexibility, as the effective date of commencement remains subject to the approval of the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, who will issue an order through the Official Gazette.
The National President of Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, warned that the tax burden will ultimately be transferred to consumers. He explained that retailers cannot absorb the surcharge because their profit margins are already below three percent.
“When this was first discussed in 2007, it was dropped because conditions were not favourable. At that time, five percent amounted to about ₦2 or ₦3. Today, at ₦900 per litre, five percent translates to about ₦45. That size of money is not what the industry can accommodate,” Gillis-Harry said.
He stressed that the surcharge would only worsen the already volatile pricing environment. “The consumer will certainly be the final person to pay the five percent. Industry players cannot support this policy because the impact will be very harsh on Nigerians.”
The policy has sparked anger among citizens, with many describing it as insensitive amid the rising cost of living.
On social media, Engr. Oyibo Donatus warned that the surcharge would trigger another wave of inflation in 2026. “The economy is getting tighter, and this will be too much to bear for petroleum products we are naturally gifted with. How will the common man survive?”
Another citizen, Udofia Essien, criticized the government for punishing Nigerians instead of leveraging the country’s crude oil advantage. “Those who imposed it will never feel the pain. Many countries tax petrol but create jobs for citizens to pay. Nigeria punishes hers,” he said.
Dayo Wilson noted that transportation costs had become unbearable even before the new tax. “Petrol is ₦865 without subsidy, CNG has jumped to ₦450, diesel is ₦1,300 per litre, electricity is ₦1,000 for just four units, VAT is 7.5 percent, and personal income tax is 15–18 percent. Now they are adding another surcharge.”
Defending the policy, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, said the surcharge is designed to fund critical infrastructure.
“The intention is to earmark and dedicate the revenue from this tax into providing transport infrastructure that can reduce logistics costs and, in the long run, bring down inflation,” Oyedele explained.
He added that the implementation date would be determined carefully by the finance minister “based on when it is appropriate to do so.”
The Nigeria Tax Administration Act is part of a broader tax reform package that also includes the Nigeria Revenue Service (Establishment) Act, the Joint Revenue Board (Establishment) Law, and other measures aimed at boosting government revenue, reducing borrowing, and improving fiscal transparency.
While the government insists the surcharge will help fund long-term infrastructure and clean energy transition, experts warn that its short-term effect could be steeply inflationary, further squeezing Nigerian households already grappling with rising fuel, transport, and electricity costs.