News Update
Following the establishment of the new tax law, Nigerians buying petrol across the country will now pay an additional N45 for each litre of fuel they purchase from 2026 if the price remains unchanged at the rate of N900.
VAM News reports that the development is due to the provision of a five per cent surcharge in the 2025 Nigeria Tax Administration Act on refined petroleum products in a bid to promote the use of clean energy.
The five per cent surcharge on refined petroleum products is contained in the Nigeria Tax Administration Act, one of four tax reform bills signed into law by President Bola Tinubu on June 26, 2025, with implementation slated for January 2026.
The policy targets fossil fuel products provided or produced in Nigeria.
Fossil fuel products include petrol, diesel, kerosene, aviation fuel, and Compressed Natural Gas, among others. They are derived from the processing of fossil fuels such as coal, petroleum, and natural gas.
However, items exempted from the new tax are clean or renewable energy products, as well as household kerosene, cooking gas, and Compressed Natural Gas.
According to the law, the surcharge will be imposed on all “chargeable fossil fuel products” and will be calculated based on the retail price of the product. The Act stipulates that the surcharge will apply to a “chargeable transaction” such as the supply, sale, or payment for the product, “whichever occurs first”.
The law read in part, “A surcharge is imposed at five per cent on chargeable fossil fuel products provided or produced in Nigeria, and shall be collected at the time a chargeable transaction occurs.
“(1) For the purpose of imposing a surcharge on fossil fuel products, the chargeable transaction shall be the supply, sale, or payment, whichever occurs first. (2) Surcharge shall be computed based on the retail price of all chargeable fossil fuel products.”
The implementation date, however, remains undecided and is now subject to the approval of the Minister of Finance and Coordinating Minister of the Economy, Wale Edun. “The minister may, by an Order issued in the Official Gazette, indicate the effective date of commencement of the administration of the surcharge on fossil fuel products under this Chapter,” the Act said.
“The Service shall administer and collect the surcharge every month and may issue regulations for its administration,” a section of the Act reads. A surcharge is an additional fee or tax added to the price of a good or service beyond the base price.
The law tasks the Federal Inland Revenue Service, which will be renamed the Nigeria Revenue Service by 2026, with administering and collecting the surcharge every month. It also empowers the agency to issue further regulations for effective implementation.
It further stated, “The surcharge under this Chapter shall not apply to the following fossil fuel products: (a) clean or renewable energy products; (b) household kerosene; (c) cooking gas; and (d) Compressed Natural Gas.
“(2) For the purpose of this section, ‘clean or renewable energy’ means energy from solar, wind, hydropower, geothermal, or plant and animal waste, which are naturally replenishing, produce little or no environmental pollution or greenhouse gas emissions, and do not deplete over time.”
The Nigeria Tax Act is one of four tax laws signed into law by President Tinubu to overhaul the country’s tax framework. The others include the Joint Revenue Board (Establishment) Law, the Nigeria Revenue Service (Establishment) Act, and the Nigeria Tax Administration Act.
The laws are aimed at enhancing revenue collection efficiency, promoting fiscal transparency, and supporting the implementation of Nigeria’s medium-term revenue strategy.
With rising government borrowing and growing fiscal pressures, the surcharge is expected to form part of new efforts to boost non-oil revenue, though its real impact will depend largely on how and when it is implemented.