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The Federal Government is expected to generate N796bn annually from the implementation of a five per cent surcharge on domestically produced and imported petrol.
This surcharge on refined petroleum products is outlined in the Nigeria Tax Administration Act, which is part of four tax reform bills signed into law by President Bola Tinubu on June 26, 2025, and is set to take effect on January 1, 2026.
Consumers have opposed this initiative, arguing that it follows the previous removal of fuel subsidies and fails to consider the challenging economic conditions across the country.
Oil marketers have warned that this surcharge could further increase the prices at the pump for refined petroleum products.
The surcharge is part of the government's strategy to enhance non-oil revenues and promote fiscal sustainability in light of increasing public debt and costs associated with subsidies.
The policy focuses on fossil fuel products that are either provided or produced in Nigeria, including petrol, diesel, kerosene, aviation fuel, and Compressed Natural Gas (CNG), but excludes clean or renewable energy sources, household kerosene, cooking gas, and CNG.
Analysis indicated that the government could earn approximately N796bn specifically from petrol due to the new surcharge, based on 2024 estimates of national petrol consumption and refining capacity data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
The total petrol consumption was reported to be around 18.75 billion litres in 2024, equating to about N15.93tn at an average price of N850 per litre during that period. Thus, the five per cent of N15.93tn amounts to N796bn, illustrating the potential revenue solely from petrol, not accounting for other fossil fuel derivatives like diesel and aviation fuel.
The Act specifies that the surcharge will apply to all "chargeable fossil fuel products" and will be calculated based on the retail price at the time of a “chargeable transaction,” defined as the supply, sale, or payment of the product.
It also states that the charge will be collected at the time a transaction takes place. However, the start date for this surcharge's implementation remains unclear and is pending approval from the Minister of Finance and Coordinating Minister of the Economy, Wale Edun.
The Federal Inland Revenue Service, which will be renamed the Nigeria Revenue Service by 2026, will manage and collect the surcharge monthly and can establish additional regulations for effective enforcement. The Act emphasizes that the surcharge does not apply to specific fossil fuel products such as clean or renewable energy sources and household fuels.
The Nigeria Tax Act is one of several tax laws signed by President Tinubu aimed at reforming the country's tax structure, including the Joint Revenue Board (Establishment) Law and the Nigeria Revenue Service (Establishment) Act. These reforms aim to improve revenue collection efficiency, enhance fiscal transparency, and assist in implementing Nigeria's medium-term revenue strategy, especially amidst rising government borrowing and fiscal challenges.
Various stakeholders, including marketers, transport workers, farmers, human rights advocates, and civil society organizations, have expressed their disapproval of the planned five per cent charge on fuel prices.
The National Chairman of the Joint Drivers Welfare Association, Akintade Abiodun, criticized the government's approach as treating Nigerians as “lab rats” for unpopular economic measures. The Association of Nigerian Refineries Petroleum Marketers has also raised concerns about potential operational and economic impacts of the surcharge, emphasizing the need for strong regulatory frameworks to prevent a return of issues experienced with subsidies.
They have shown conditional support for the proposed levy, acknowledging the need for improved infrastructure but calling for careful implementation connected to immediate road rehabilitation efforts.
The Chancellor of the International Society for Social Justice and Human Rights, Jackson Omenazu, condemned the government for enacting policies perceived as harmful to the public, warning of possible public outrage if the government persists in ignoring citizens' hardships.
The Independent Petroleum Marketers Association of Nigeria has indicated that the five per cent surcharge on petroleum products could raise fuel prices nationwide, as this financial burden is likely to be passed on to consumers.
They noted that even though industry players, such as refineries, would include this levy in their pre-pricing structure, the overall increase would eventually affect consumers due to the slim profit margins that marketers operate on.
