The Nigerian government will introduce a new petrol consumption tax starting January 2026, imposing a 5% levy at the point of purchase.
This means Nigerians will pay an additional N500 tax for every N10,000 spent on petrol.
The tax is part of a broader strategy aimed at discouraging fossil fuel use and encouraging the adoption of cleaner energy alternatives.
According to official statements, the tax will not apply to kerosene, cooking gas, Compressed Natural Gas (CNG), or other renewable and clean energy sources.
The government intends to use the revenue generated from this policy to fund climate change initiatives and invest in renewable energy projects.
The tax aims to place a cost penalty on fossil fuel consumption, pushing consumers toward greener options while generating funds to support Nigeria’s environmental goals.
This initiative follows Nigeria’s removal of the fuel subsidy and efforts to shift towards sustainable energy, including growth in solar energy adoption which ranked Nigeria 4th in Africa in 2024.
However, critics warn that the flat 5% tax rate may disproportionately affect low-income households, who rely heavily on petrol for transportation and fuel for generators.
With rising transport costs expected, analysts suggest this could exacerbate inflation and increase the cost of living for many Nigerians.
There are calls for a more progressive tax design that takes income disparities into account, and for government transparency on how tax revenues will be utilized.
Practitioners highlight the importance of a clear framework to ensure funds contribute effectively to Nigeria’s green transition while protecting vulnerable populations from undue hardship.
This new fossil fuel surcharge reflects Nigeria’s commitment to align with international climate commitments while balancing fiscal needs.
It represents a significant policy shift as the country seeks to reduce its long-standing reliance on oil revenue and move towards a more sustainable energy future.
