Nigerians buying petrol will pay additional N45 for each litre of fuel they purchase come 2026 if the price remains unchanged at the rate of N900.
This is due to the provision of a five percent surcharge in the 2025 Nigeria Tax Administration Act on refined petroleum products in a bid to promote the use of clean energy.
The five per cent surcharge on refined petroleum products is contained in the Nigeria Tax Administration Act, one of four tax reform bills signed into law by President Bola Tinubu on June 26, 2025 with implementation slated for January 2026.
The policy targets fossil fuel products provided or produced in Nigeria.
Daily Trust reports that fossil fuel products include petrol, diesel, kerosene, aviation fuel, and Compressed Natural Gas, among others. They are derived from the processing of fossil fuels such as coal, petroleum, and natural gas.
However, items exempted from the new tax are clean or renewable energy products, as well as household kerosene, cooking gas, and Compressed Natural Gas.
What the new tax law says?
According to the law, the surcharge will be imposed on all “chargeable fossil fuel products” and will be calculated based on the retail price of the product. The Act stipulates that the surcharge will apply to a “chargeable transaction” such as the supply, sale, or payment for the product, “whichever occurs first”.
The law read in part, “A surcharge is imposed at five per cent on chargeable fossil fuel products provided or produced in Nigeria, and shall be collected at the time a chargeable transaction occurs.
“(1) For the purpose of imposing a surcharge on fossil fuel products, the chargeable transaction shall be the supply, sale, or payment, whichever occurs first. (2) Surcharge shall be computed based on the retail price of all chargeable fossil fuel products.”
The implementation date, however, remains undecided and is now subject to the approval of the Minister of Finance and Coordinating Minister of the Economy, Wale Edun. “The minister may, by an Order issued in the Official Gazette, indicate the effective date of commencement of the administration of the surcharge on fossil fuel products under this Chapter,” the Act said.
“The Service shall administer and collect the surcharge every month and may issue regulations for its administration,” a section of the Act reads. A surcharge is an additional fee or tax added to the price of a good or service beyond the base price.
The law tasks the Federal Inland Revenue Service, which will be renamed the Nigeria Revenue Service by 2026, with administering and collecting the surcharge every month. It also empowers the agency to issue further regulations for effective implementation.
It further stated, “The surcharge under this Chapter shall not apply to the following fossil fuel products: (a) clean or renewable energy products; (b) household kerosene; (c) cooking gas; and (d) Compressed Natural Gas.
“(2) For the purpose of this section, ‘clean or renewable energy’ means energy from solar, wind, hydropower, geothermal, or plant and animal waste, which are naturally replenishing, produce little or no environmental pollution or greenhouse gas emissions, and do not deplete over time.”
The Nigeria Tax Act is one of four tax laws signed into law by President Tinubu to overhaul the country’s tax framework. The others include the Joint Revenue Board (Establishment) Law, the Nigeria Revenue Service (Establishment) Act, and the Nigeria Tax Administration Act.
The laws are aimed at enhancing revenue collection efficiency, promoting fiscal transparency, and supporting the implementation of Nigeria’s medium-term revenue strategy.
With rising government borrowing and growing fiscal pressures, the surcharge is expected to form part of new efforts to boost non-oil revenue, though its real impact will depend largely on how and when it is implemented.
Consumers will pay the 5% – Marketers
Daily Trust had spoken with the National President of Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, who said the introduction of the charge is very sudden to the industry.
He disclosed that when the issue was first discussed in 2007, it was dropped because the conditions were not favourable.
He recalled that then the 5percent was just about N2 to N3 but today’s 5percent of N850 per litre is quite high.
He said, “That size of money is not what the industry can accommodate now. The sales benefit and profit margin that we enjoy is less than 3 percent and you are buying for N850 and then selling for N920. So, what is your profit when you take off operational margins, overheads and different things? Where is the 5 percent going to come from? It is targeted at the consumer.
“The consumer will certainly be the final person to pay the 5 percent. So, whether we like it or not, that will be increasing the fuel price. I don’t think that industry players will be able to accommodate that because we have to pay first before the end user pays us. So, with the kind of price fluctuation that we have seen in the last few months, is it possible that we could be able to sell off a particular consignment before prices are changed more than four times in the week or in the month? So, the impact will be very harsh on Nigeria. That’s why we are not giving it the support that other countries should have been giving.”
Daily Trust
