The Federal Government has introduced a 5 per cent tax on petrol, diesel, and other fossil fuels, to take effect from January 2026.
The levy is contained in the Nigeria Tax Administration Act (NTAA) 2025, signed into law by President Bola Tinubu on June 26, 2025. The Act is part of wider tax reforms that also include the Nigeria Revenue Service Act (NRSA) and the Joint Revenue Board Act (JRBA).
According to officials, the measure is designed to increase government revenue while supporting a gradual transition to cleaner energy sources. The surcharge will be collected monthly by the Federal Inland Revenue Service (FIRS), which will be renamed the Nigeria Revenue Service (NRS).
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Industry stakeholders, however, say the tax will raise pump prices further. Nigerians currently pay between ₦890 and ₦1,000 per litre of petrol, following the 2023 subsidy removal. Estimates from the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN) suggest the new tax could add about ₦42.50 per litre.
In 2024, Nigeria consumed about 18.75 billion litres of petrol, valued at roughly ₦15.93 trillion, according to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). A 5 per cent surcharge on this volume could generate approximately ₦796 billion in annual revenue, with additional income expected from diesel and aviation fuel.
The law exempts some fuels and energy sources, including cooking gas (LPG), household kerosene, compressed natural gas (CNG), solar, wind, hydropower, and biofuels.
Analysts note that while the policy could boost government finances, it is also likely to add pressure on transport costs, food prices, and general living expenses.
