5% petrol and diesel tax delay offers little relief for Nigerians

Nigeria’s worst cost-of-living crisis in a generation is set to deepen, as government confirmation on Tuesday showed a 5% fuel surcharge will eventually hit citizens’ pockets — even if not immediately.

Wale Edun, Minister of Finance and Coordinating Minister of the Economy, moved to calm public anger over the levy contained in the newly signed Nigeria Tax Administration Act 2025. Speaking in Abuja, Edun said:

“The inclusion of the surcharge in the 2025 Act does not mean an automatic introduction of new tax. It doesn’t mean fresh taxation automatically… there is a whole formal process involved, and as of today, no order has been issued, none is being prepared and there is no plan. There is no immediate plan to implement any surcharge.”

The minister’s emphasis on “no immediate plan” means the levy is already law and only awaits his eventual proclamation. The Act stipulates the surcharge will take effect from January 1, 2026, once the finance minister issues an order in the government Gazette. That clarification has reassured no one: it confirms the surcharge is not hypothetical, but simply a matter of timing.

What the tax is about

The new law revives a dormant provision first created in 2007 under the Federal Roads Maintenance Agency (FERMA) Act. It imposes a 5% surcharge on every sale of fossil fuel products in Nigeria — petrol, diesel, and kerosene — to be collected at the point of supply. The funds are earmarked for transport infrastructure: 40% to FERMA and 60% to state-level equivalents.

Cleaner energy sources such as LPG, CNG, and renewables are exempt. In theory, the surcharge is intended to improve road networks, cut logistics costs, and eventually ease inflation. But Nigerians, still reeling from last year’s subsidy removal, see it as yet another cost piled on fuel that has already tripled in price.

For example, every ₦10,000 spent on petrol would carry an extra ₦500 once the surcharge begins. On diesel — widely used by transporters, manufacturers, and small businesses — the impact could cascade through supply chains, raising food prices and operating costs across the economy.

Nigerians already stretched

Since President Bola Tinubu took office in 2023, his reforms — including petrol subsidy removal, electricity tariff hikes, and repeated naira devaluations — have triggered inflation above 30% and widespread hardship. Food, rent, and transport costs are at record highs. Labour unions and opposition figures have warned the surcharge will worsen an already intolerable situation.

Former Anambra governor and Labour Party leader Peter Obi condemned the plan as poorly timed: “Nigerians will pay a five per cent tax when buying their everyday fuel or diesel at a time when millions can hardly even afford the cost of transportation.”

Consumer groups say the ripple effect will be severe.

Broader tax reform

The fuel levy is only one piece of a wider overhaul. Alongside the Tax Administration Act, the government signed three other laws — the Revenue Service Bill, the Joint Revenue Board Bill, and a broader Tax Reform Bill. Edun called them “transformational,” aimed at harmonising Nigeria’s fragmented tax regime, boosting efficiency, and raising revenue.

Nigeria’s tax-to-GDP ratio remains among the lowest in Africa, at about 10%, compared with a continental average of 16%. Tinubu’s team wants to close that gap.

Analysts say even if delayed, the surcharge will eventually test the government’s promise not to “make things more burdensome.”