Nigeria is preparing for a fresh wave of economic and political debate following the government’s plan to introduce a 5 per cent fuel surcharge under the Nigeria Tax Administration Act, 2025. The measure, signed into law by President Bola Tinubu in June, will apply to refined petroleum products including petrol and diesel once it is formally activated.
The surcharge is not an entirely new creation. It traces its roots to the 2007 Federal Roads Maintenance Agency (Amendment) Act, but has now been harmonised into the broader tax framework for consistency and accountability. According to the legislation, the levy will be collected at the point of supply, sale, or payment, whichever comes first.
Contrary to early reports suggesting a January 2026 rollout, the measure will not commence automatically. A ministerial order from the Finance Minister, published in the Official Gazette, is required before enforcement can begin. This technical step means the exact start date remains uncertain, even as political debate intensifies.
To cushion its effects, the government has exempted kerosene, liquefied petroleum gas (LPG), compressed natural gas (CNG), and renewable energy sources such as solar from the levy. The rationale, officials argue, is to protect low-income households and encourage Nigeria’s gradual shift towards cleaner energy sources.
Government projections estimate annual revenues from the surcharge could fall between ₦796 billion and over ₦1 trillion. These funds, it says, will be earmarked for road construction and maintenance, addressing a chronic infrastructure gap that has long imposed heavy costs on logistics, trade, and safety across the country.
Divided opinions
Supporters of the measure present it as a pragmatic way of securing reliable funding for critical infrastructure. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, insists that road financing is long overdue. Better roads, he argues, would lower vehicle maintenance costs, reduce travel time, and improve overall productivity.
Yet many economists, industry groups, and civil society voices have sounded the alarm over its potential fallout. Dr Muda Yusuf, Chief Executive of the Centre for the Promotion of Private Enterprise, warns that the tax could fuel fresh inflationary pressures, aggravate poverty, and provoke public anger. “The political backlash could be severe,” he cautioned, stressing that households are already under extraordinary financial strain.
Petroleum analyst Juliet Alohan-Ukanwosu described the timing as “insensitive,” given Nigeria’s ongoing cost-of-living crisis. Civic advocate Tijan Bolton predicted knock-on effects across agriculture and manufacturing, as higher transport and energy costs ripple through supply chains.
The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) also voiced apprehension, with its president Billy Gillis-Harry warning that the surcharge could force smaller operators out of business, causing closures, job losses, and fuel supply disruptions.
Other sector stakeholders, such as Petroleumprice.ng CEO Olatide Jeremiah and the Oil and Gas Service Providers Association of Nigeria, echoed concerns that the measure could erode purchasing power and deepen poverty.
Counting the cost
With petrol retailing at about ₦900–₦950 per litre, a 5 per cent surcharge translates to an additional ₦45–₦47.50 per litre. Analysts believe this increase will push commuting and logistics costs higher, with inevitable knock-on effects on food prices, manufacturing expenses, and service charges in ride-hailing and delivery industries.
The fears are compounded by recent history. Barely two years ago, the removal of fuel subsidies caused transport fares to triple overnight and helped push inflation beyond 34 per cent. Critics argue that another sharp cost-push shock could be devastating for households, many of whom already spend over half their income on energy and transport.
Small and medium-sized enterprises, reliant on fuel for both logistics and power generation, face particular risks. Analysts warn that higher operating costs could push many into closure, with further job losses worsening unemployment and slowing recovery.
The case for reform
Despite the growing criticism, government officials remain adamant that the benefits outweigh the pain. They point to the possibility of creating thousands of jobs in road construction, stimulating local economies, and reducing long-term logistics costs once infrastructure improves. The exemptions for CNG and renewables are also being framed as a strategic incentive to accelerate Nigeria’s energy transition, potentially making the economy less vulnerable to oil shocks.
Some experts believe that the policy could succeed if it is carefully phased and paired with compensatory measures. Proposals include targeted transport subsidies for low-income earners, conditional cash transfers, and strict transparency frameworks to guarantee that revenues are ring-fenced for road projects. Without such safeguards, however, there are fears that the levy may simply become another fiscal burden, deepening inequality and undermining public trust.
The coming months will test whether the administration can balance its revenue ambitions with the immediate realities of inflation, poverty, and fragile public confidence. Nigeria’s roads are undeniably in dire need of repair, but the political cost of asking citizens to pay more for fuel so soon after subsidy removal may prove just as steep as the fiscal one.