The Nigerian government has introduced a 5% surcharge on petrol and other fossil fuel products, effective January 1, 2026.
This move is part of a broader tax reform package aimed at modernizing Nigeria’s tax system, reducing dependence on crude oil revenues, and promoting cleaner energy adoption.
The tax will apply to refined fossil fuel products, including petrol, diesel, aviation fuel, and kerosene, while exemptions will be granted to household kerosene, liquefied petroleum gas (LPG), compressed natural gas (CNG), and renewable energy sources.
The Federal Inland Revenue Service (FIRS), soon to be rebranded as the Nigeria Revenue Service (NRS), will oversee the implementation of the new fuel tax.
According to the Executive Chairman of FIRS, Dr. Zacch Adedeji, the government will ensure a smooth rollout with a focus on transparency and fairness in the collection of the surcharge.
A six-month sensitization campaign will precede the enforcement of the tax to educate Nigerians and prepare oil marketers for compliance.
The 5% tax is expected to generate significant revenue for the government, with estimates suggesting approximately ₦796 billion annually from petrol alone. The tax reform package also includes other key provisions, such as:
- VAT Exemptions: Essential items like basic food, education, healthcare, and accommodation will be exempt from Value Added Tax.
- Tax Relief: Low-income earners and Small and Medium-sized Enterprises (SMEs) will benefit from reduced tax burdens, easing the financial strain on Nigeria’s informal economy.
- Renewable Energy Incentives: The government aims to promote investments in renewable energy and local production through tax incentives.
The introduction of the 5% fuel tax has sparked mixed reactions, with some stakeholders expressing concerns about its potential impact on inflation and household budgets.
Petroleum product marketers have warned that the tax would increase pump prices and have a ripple effect on the economy. Civil society organizations have also criticized the policy, arguing that it would disproportionately affect low-income Nigerians.
