The Nigerian government could rake in up to ₦1 trillion annually if the 5% surcharge announced on all refined petroleum products begins January 1, 2026.
A surcharge is an additional tax or fee added to the base price of a good or service.
This new tax is part of the Nigeria Tax Administration Act, one of four tax reform bills signed into law by President Bola Tinubu on June 26, 2025.
According to the law, the surcharge will apply to all “chargeable fossil fuel products” and will be calculated based on the retail price of the product.
It will be imposed at the point of a “chargeable transaction” which includes supply, sale, or payment, depending on which happens first.
“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,” the law read in part.
“(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 law targets petrol, diesel, and aviation fuel, while household kerosene (HHK), cooking gas (LPG), compressed natural gas (CNG), and clean or renewable energy products are exempted.
Boosting non-oil revenues
The surcharge is part of the federal government’s broader strategy to boost non-oil revenues and improve fiscal stability amidst rising public debt.
An independent analysis by Bavijas estimates that the surcharge could generate up to ₦793 billion annually from petrol alone.
This is based on an average pump price of ₦870 per litre and a daily consumption of 50 million litres, as reported by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
Overall, government earnings from the proposed surcharge could cross ₦1 trillion annually if other fuels like diesel and jet fuel are added.
The public doesn’t buy the idea
Despite the potential revenue boost, the plan is not without public criticism.
Consumers and oil marketers argue that the surcharge, which comes after the removal of fuel subsidies, will worsen already harsh economic conditions.
Marketers have warned that the tax could lead to further increases in pump prices.
They operate on narrow profit margins and are likely to pass additional costs on to consumers at the pump.
In a statement, the Country Director of ActionAid Nigeria, Andrew Mamedu, said that while the law exempts clean and renewable fuels such as HHK, LPG, and CNG, the exclusion does not reflect the everyday energy needs of most Nigerians.
“Without a robust and transparent accountability framework, such surcharges risk becoming additional burdens on the people rather than solutions to development financing,” the organization stated in a press release.
Implementation timeline still pending
Although the policy is scheduled to take effect from January 1, 2026, its full implementation requires the approval of the Minister of Finance and Coordinating Minister of the Economy, who is yet to announce an official commencement date.
“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 noted.
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