The Nigerian government is expected to rake in approximately N796 billion annually from a 5% surcharge on locally produced and imported petrol. This new tax policy, set to take effect on January 1, 2026, aims to boost non-oil revenue and promote fiscal sustainability amid mounting public debt and subsidy-related costs.
Key Points
- *Revenue Generation*: The 5% surcharge is projected to generate N796 billion annually from petrol alone, based on 18.75 billion liters of petrol consumed in 2024, translating to N15.93 trillion at an average price of N850 per liter.
- *Implementation*: The surcharge will be imposed on all "chargeable fossil fuel products" and calculated based on the retail price of the product, with the Federal Inland Revenue Service responsible for administering and collecting the surcharge.
- *Exemptions*: Clean or renewable energy products, household kerosene, cooking gas, and Compressed Natural Gas are exempt from the new tax.
Impact on Consumers and Marketers
The introduction of the 5% surcharge has sparked opposition from consumers and marketers, who argue that it will further increase the pump price of fuel, exacerbating the country's already fragile downstream pricing environment. The Independent Petroleum Marketers Association of Nigeria (IPMAN) has warned that the surcharge may lead to higher fuel prices, as marketers cannot absorb the additional burden ¹ ².
Government's Objective
The Nigerian government aims to use the revenue generated from the surcharge to promote fiscal sustainability and reduce dependence on oil revenue. However, the effectiveness of this policy will depend on how it is implemented and the impact it has on the broader economy ³.
