Tinubu Orders Nigerians to Pay 5% Fuel Tax Effective January 2026

President Bola Ahmed Tinubu has approved a 5% surcharge on petrol and other fossil fuel products, set to take effect from January 1, 2026. The tax, included in the newly signed Nigeria Tax Administration Act (NTAA), is part of a broader reform package designed to modernise Nigeria’s tax system, reduce dependence on crude oil revenues, and promote cleaner energy adoption.

TJ News Nigeria reports that the 5% surcharge was announced after Tinubu signed four tax reform bills into law, including the NTAA, the Nigeria Tax Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board Act. The reforms, signed on June 26, 2025, aim to broaden Nigeria’s tax base and streamline administration while introducing incentives for renewable energy usage.

Implementation Timeline

The Federal Inland Revenue Service (FIRS), which will be rebranded as the Nigeria Revenue Service (NRS), will oversee the implementation of the new fuel tax. According to Dr. Zacch Adedeji, the Executive Chairman of FIRS, enforcement will begin January 2026, following a six-month sensitisation campaign to educate Nigerians and prepare oil marketers for compliance.

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In an interview reported by Channels TV, Adedeji explained that the government’s approach would ensure a smooth rollout, with a focus on transparency and fairness in the collection of the surcharge.

Scope and Coverage

The 5% tax applies to all refined fossil fuel products, including:

• Petrol (Premium Motor Spirit – PMS)
• Diesel (Automotive Gas Oil – AGO)
• Aviation fuel (Jet A1)
• Kerosene

However, exemptions apply to household kerosene, liquefied petroleum gas (LPG), compressed natural gas (CNG), and all renewable energy sources such as solar, wind, hydropower, geothermal energy, and biofuels.

A report by Daily Trust indicates that liability for the surcharge arises at the point of supply, sale, or payment — whichever occurs first.

Revenue Projections

Data from Nigeria’s 2024 fuel consumption records shows that Nigerians consumed approximately 18.75 billion litres of petrol at an average price of ₦850 per litre, equating to about ₦15.93 trillion spent on petrol alone.

If applied solely to petrol, the 5% tax could yield ₦796 billion annually. Analysts suggest that including diesel and aviation fuel could push total revenue far higher, providing much-needed funding for public services and infrastructure.

A report by Nigerian News 24 highlights the government’s expectation that the surcharge will diversify revenue sources and support Nigeria’s energy transition goals.

Industry Reactions

Concerns from Petroleum Marketers

Petroleum product marketers have voiced concerns about the timing and implications of the tax. Billy Gillis-Harry, President of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), described the levy as sudden and warned that it would inevitably increase pump prices.

In comments published by West Africa Weekly, Gillis-Harry said:

“This tax will make things very difficult for businesses and consumers. Margins in this sector are already below 3%. The cost will be passed on to consumers, and this will have a ripple effect across the economy.”

He recommended applying the surcharge primarily to imported fuel to support domestic refining projects, such as the Dangote Refinery, while also calling for government incentives to encourage local refining capacity.

Economic Experts Weigh In

Energy policy analysts note that fuel surcharges are a common fiscal tool globally, designed to discourage fossil fuel consumption and fund clean energy initiatives. However, they warn that implementing the tax during a cost-of-living crisis could exacerbate inflation.

In a Semafor report, experts recommend a phased approach, suggesting that the government could offer tax rebates or subsidies to vulnerable households to cushion the impact of higher fuel prices.

Civil Society Response

Civil society organisations have criticised the policy, warning that the tax will disproportionately affect low-income Nigerians. Groups like ActionAid Nigeria argue that such measures should be paired with stronger social protection programs to avoid worsening poverty.

Communications Week Nigeria quoted advocacy groups as saying that while environmental and revenue objectives are valid, policies must be implemented in ways that consider economic realities.

Part of a Broader Reform Plan

The fossil fuel surcharge is just one element of Tinubu’s tax reform strategy. Other provisions include:

• Renaming FIRS to Nigeria Revenue Service (NRS) and granting it expanded powers to improve revenue collection. (PanAtlantic Kompass)
• Value Added Tax (VAT) exemptions on essential items such as basic food, education, healthcare, and accommodation. (The Guardian)
• Tax relief for low-income earners and SMEs, reducing the burden on Nigeria’s informal economy. (Pulse.ng)

Analysts say these reforms are designed to expand Nigeria’s tax base while creating incentives for investments in renewable energy and local production.

Quick Summary

Key Takeaway

The 5% fuel surcharge is one of the most significant fiscal reforms introduced by the Tinubu administration. It has the potential to diversify Nigeria’s revenue streams, reduce reliance on oil exports, and encourage a gradual shift to cleaner energy.

However, the policy has drawn criticism from marketers, economists, and civil society, who warn of its impact on inflation and household budgets. The next six months of public sensitisation and industry engagement will be critical in determining how smoothly this reform is implemented.