The Federal Government may rake in ₦796 billion annually from the introduction of a five per cent surcharge on locally produced and imported petrol, based on its new tax policy slated to take effect from January 1, 2026, The PUNCH analysis has revealed.
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.
However, consumers have opposed the move, stressing that the government had earlier removed fuel subsidies and now plans to impose a five per cent surcharge on fuel, without considering the harsh economic realities nationwide.
This came as oil marketers stated that the five per cent surcharge may further hike the pump prices of refined petroleum products.
The surcharge forms part of government efforts to shore up non-oil revenues and promote fiscal sustainability amid mounting public debt and subsidy-related costs. The policy targets fossil fuel products provided or produced in Nigeria.
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.
Findings showed that the government would garner about ₦796 billion annually from only petrol once the five per cent surcharge takes effect.
Using the volume of imported and refined petrol, an analysis showed that the government could earn ₦796 billion based on the 2024 estimates of national consumption and refining capacity production data provided by the Nigerian Midstream and Downstream Petroleum Regulatory Authority.
This ₦796 billion is purely for petrol and doesn’t include other fossil fuel derivatives such as diesel and aviation fuel.
A breakdown of data from the NMDPRA shows that the total volume of petrol consumed by Nigerians reached 18.75 billion litres in 2024. NMDPRA, an agency of the Federal Government, is the midstream and downstream regulator of the oil and gas industry.
The 18.75 billion litres of petrol translates to about ₦15.93 trillion, using the average price of ₦850 for a litre of petrol consumed in Nigeria during the review period. Five per cent of ₦15.93 trillion represents ₦796 billion, which is the sum that the Federal Government may rake in annually from only petrol once it implements the planned surcharge.
This, therefore, implies that the government’s earnings from the proposed surcharge on fossil fuel products (petrol, diesel, and aviation fuel) would be more than ₦796 billion once the five per cent surcharge policy on refined petroleum products takes effect, after being approved by the Minister of Finance, as stated in the Act.
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.
The PUNCH