The Federal Government’s plan to introduce a five per cent surcharge on petrol, diesel and aviation fuel has ignited widespread concern among citizens, businesses, labour unions, and economic analysts. The fuel tax, which is embedded in Nigeria’s new Tax Administration Act 2025, has sparked intense debate among civil society organizations (CSOs), with activists warning about its potential economic impact on Nigerians.
While the government argues that the levy will generate revenue for critical infrastructure, stakeholders insist the policy is ill-timed, inflationary, and damaging to investor confidence.
Signed into law under the Nigeria Tax Administration Act on June 26, 2025, the new regulation mandates that the surcharge be applied to every litre of refined fossil fuel sold in Nigeria—whether imported or locally produced. However, cleaner alternatives such as LPG, kerosene, and compressed natural gas (CNG) are exempted.
The government maintains the funds will be channelled into transport infrastructure projects, aimed at reducing logistics costs in the long run.
Manufacturers, business owners kick
David Etim, Project Implementation Team Leader of the Calabar and Gulf of Guinea Trade Centre, re-echoed the position of the Minister of Finance, Wale Edun, and that of the chairman of the Presidential Tax Reform Committee, Taiwo Oyedele, that the tax is not new as it has been in the statutes under FERMA and the PPRA, which is now the downstream regulatory authority.
“As a business community we should be clamouring for the transparency of that process and the timing of the process. A lot of transitioning is going to take place in terms of the tax environment in Nigeria. A lot of transition is taking place now going forward into the future. People need to understand the new tax environment.”
Etim, who is also a former president of the Calabar Chamber of Commerce, Industry Mines and Agriculture (CALCCIMA), explained that the government needs to ensure that the whole tax regime is broken into bite sizes, so that people begin to digest it step by step.
“We don’t need to choke the business community or the populace with taxation or levies or government revenues.
“The issue is, when the tax comes into being, there must be a monitoring and evaluation mechanism put in place to ensure that money collected in tax is deployed, in road maintenance.
“There must be a direct correlation between the tax collected and the infrastructure maintenance or development that takes place.
“We must see a direct connection. It’s not enough to collect tax. It’s not enough to argue on whether the tax should be collected or not. The law says the tax should be collected. That’s a given. But when that tax is collected, how is it deployed?
What is the mechanism in place to monitor? As citizens, we must monitor the money being collected.”
On the implications for the economy, manufacturers, traders, businesses, and Nigerians, Etim argues that if the tax is properly applied to improve road infrastructure, it will improve travel time from point A to point B.
“Can you imagine the cost to businesses if one could be stuck for 24 hours on a road for a journey that is supposed to last for one hour?
But many Nigerians remain sceptical. Past experience with similar levies has left little trust that the proceeds of the tax will be transparently used.
Daniel Dickson-Okezie, a public affairs analyst argues that the tax shows government insensitivity to the economic wellbeing of the people.
“Nigerians are yet to recover from the pains of subsidy removal, which already triggered inflation. Adding a fresh tax on fuel will only worsen the crisis for SMEs, manufacturers, and ordinary citizens.”
For him, the five per cent fuel tax is a wrong policy at the wrong time.
“Subsidy was removed on the assumption of office by President Bola Tinubu. There was no serious plan to cushion the effect of the removal of subsidy. Most people agree that subsidy was really a problem. The removal was necessary, but the question is, certain things had to be put in place to cushion the effect, particularly the expected inflationary effect of the removal of subsidy.
“Now, the fuel tax shows a kind of insensitivity on the part of the government, not considering the effects on transportation, food and other sectors of the economy.
“The tax on fuel is bad news for SMEs, for manufacturers, for businesses and as you can see, the organised private sector is kicking heavily against this insensitive policy.
“The reason is that over time, inflation will rise. Nigerians are already crying about inflation with regards to food items, transportation, but this is going to make it worse. Most Nigerians who were really happy about the recent tax laws enacted by the government to favour low-income earners as well as SMEs are going to feel bad about the fuel tax.”
He lamented the implications of the fuel tax on the economy, insisting that manufacturers who are bedevilled by various challenges in the operating environment like poor power supply, access to forex, and so on will bear the brunt.
“Now you want to increase the price of petroleum products, the main petroleum products, PMS and AGO, just at the same time. There doesn’t seem to be any justification for this kind of tax on oil.”
Dickson-Okezie also argued that the claim that the government wants to use the tax revenue to fund transport infrastructure, doesn’t seem to make sense.
Manufacturers also raise the alarm
Imokhai Ehimigbai of the Manufacturer Association of Nigeria’s Export Group described the levy as counterproductive.
“An increase in petrol price automatically drives up transportation costs, food prices, and general inflation. You don’t grow an economy by increasing taxes; you grow it by reducing them to encourage production.”
The policy’s implications on foreign investment also come under scrutiny. Just days after President Tinubu’s return from Brazil and Japan where he wooed potential investors, critics say the five per cent tax sends the wrong signal. “Policies like this kill investor confidence,” Ehimigbai noted, warning that higher costs of doing business will discourage fresh capital inflows.
Beyond the economic debates, ordinary Nigerians are bracing for tougher times. With petrol currently selling at ₦890 per litre and CNG climbing above ₦400 per scm, citizens fear the squeeze on household incomes will intensify. Some even worry that by January 2026, when the new tax law will come into force, alternative fuels may become as expensive as petrol, erasing hopes for relief.
Labour, economists warn against deepening poverty
Labour leaders and economic experts have also warned against the strangulating effect of implementing the proposed five per cent fuel surcharge.
According to them, the policy, if allowed to fly, could worsen inflation, erode purchasing power and plunge Nigerians into deeper hardship.
The Trade Union Congress (TUC) described the plan as an act of economic wickedness against already overburdened Nigerians. Its president, Festus Osifo, warned that the surcharge would worsen poverty and hardship in the country.
He stated that workers are still reeling from the effects of subsidy removal and galloping inflation, and would resist any fresh burden on citizens. The union has already threatened nationwide strike if the proposal is not withdrawn.
Dr Aliyu Ilias, an economist and development expert explained that the surcharge is essentially a consumption tax intended to generate dedicated funds for the Federal Roads Maintenance Agency (FERMA). He noted that though the idea is not new globally, the proposed time of implementation raises concerns.
According to him, the levy translates to a significant addition to fuel costs.
“The 5 per cent surcharge simply means that for each litre of petrol as sold today, about N51 will be added. For instance, buying five litres would mean an extra N255. The government said this money would go directly into FEMA’s account to fix roads. But I think it is untimely and not good for the government to introduce such now,” he said, warning that the ripple effects on transportation and businesses could be far-reaching.
“It will reduce people’s disposable income and purchasing power, because the transporter or businessman will simply transfer the cost to the consumer.”
At the prevailing pump price of about N1, 020 per litre in Abuja and up north, analysts calculate that the 5 per cent levy would push petrol price to around N1, 071 per litre. While the increment may appear marginal on paper, experts insist it will add enormous pressure on households and businesses already grappling with high costs of living.
Prof Olufemi Saibu, a development economist at the University of Lagos, said the measure, if enforced, would amount to double taxation. He argued that Nigerians are already paying multiple levies through petroleum tax, VAT, customs duties, and road charges.
“The fuel tax is like any sales tax the government uses to raise funds. But adding an additional tax on fuel at this time will destabilise whatever stability was achieved from the last round of price hikes. Prices will skyrocket again, inflation will rise, and the stability they claim to have brought will disappear. Citizens will see it as double taxation. It will also create public resentment because, by January 2026, new taxes had already been introduced. So, this would amount to overtaxing the citizens.”
Saibu also highlighted the implications for the investment climate.
“If the business environment keeps attracting new taxes, investors may begin to see it as unfriendly. Beyond short-term inflation, this could affect competitiveness and foreign investment inflows,” the don said, advising the government to focus on maximizing revenues generated from other taxes.
“I think what the government is already collecting from existing tax rates should be enough for them to take care of road infrastructure. In the first place, what are they using other tax revenues for if they now claim this surcharge is strictly for roads? Nigerians are already contributing through multiple channels, petroleum tax, VAT, customs duties, and road levies.
“Citizens don’t see the justification. What the government should focus on is blocking leakages and ensuring transparency in how existing revenues are spent, instead of imposing fresh taxes,” he added.
Civil society urges caution
Although the tax law is said to have been in existence for several years, the plan to implement it in January 2026 is generating a range of interests.
Auwal Musa Rafsanjani, Executive Director of the Civil Society Legislative Advocacy Centre (CISLAC), explained the origins and framework of the surcharge.
“Under the 2025 Tax Administration Act, a five per cent surcharge will be levied on fossil fuel products such as petrol, diesel, and aviation fuel at supply, sale, or payment stages. This provision actually stems from the Federal Roads Maintenance Agency (FERMA) Act of 2007,” he said.
Rafsanjani added that the tax’s inclusion in the new Act aims at clarity and transparency and reminded that the tax will only take effect in January 2026 once the Finance Minister issues a formal commencement order published in the Official Gazette.
He further explained that “This process allows for assessment of economic conditions before activation of the surcharge,” highlighting important exemptions designed to protect vulnerable households.
“Household kerosene, cooking gas (LPG), compressed natural gas (CNG), and renewable energy sources such as solar, wind, and biogas are exempted from the surcharge to reduce burden on Nigerians relying on these alternatives.”
Similarly, Tunde Salman, Good Governance Team Lead, offered insight into the policy’s intent and public concerns.
“The five per cent surcharge is not a new tax; it is a long-standing provision under the 2007 FERMA Act, intended to fund road infrastructure and maintenance, which ultimately reduces travel time, logistics costs, and improves safety,” he explained.
Salman cautioned, however, that the tax would not be implemented automatically with the new law, emphasising the role of the Finance Minister’s formal commencement order.
Despite the intended benefits, he acknowledged widespread unease among Nigerians who are already grappling with inflation and rising costs. “Critics argue the surcharge is regressive, disproportionately affecting the poor since all pay the same rate, and worry about a lack of transparency regarding how the surcharge revenues—estimated at about N796 billion annually—will be used.
“There is also concern the surcharge could inflate fuel prices, leading to higher transportation and commodity costs,” he noted.
Eze Onyekpere, Lead Director at the Centre for Social Justice, strongly criticized the surcharge, calling it illegitimate in Nigeria’s current economic context. “Although the tax provision existed on paper since 2007, it was never implemented over the past 18 years. Therefore, it is effectively a new tax from the perspective of ordinary Nigerians,” Onyekpere argued.
He described the initiative as “insensitive,” given the removal of fuel subsidies has already deepened poverty and worsened macroeconomic indicators.
He stressed that “It defies logic to impose a new fuel tax without first accounting for the billions from subsidy removals,” adding that the government must demonstrate accountability before adding new financial burdens to the public.
Credit: The Sun