Nigerian Government Projected to Generate N796 Billion Annually from Proposed 5% Petrol Surcharge by 2026

The Federal Government of Nigeria is projected to generate approximately ₦796 billion each year from a proposed five percent surcharge placed on both locally produced and imported Premium Motor Spirit (PMS)—commonly known as petrol.

This revenue stream is expected to kick off following the enforcement of new tax legislation scheduled to begin on January 1, 2026, as part of sweeping fiscal reforms introduced by the current administration.

Recall that on June 26, 2025, President Bola Ahmed Tinubu gave assent to four new tax laws, aimed at revamping Nigeria’s tax framework and boosting government revenue without increasing income taxes.

One of these legislative instruments is the Nigeria Tax Administration Act, which introduces a 5% surcharge on fossil fuels. The newly signed law clearly stipulates that the surcharge will apply to all chargeable fossil fuel products that are either produced within or supplied into Nigeria. This includes products such as diesel, aviation fuel, kerosene, and compressed natural gas (CNG), among others.

However, the policy document makes a significant exemption for renewable energy sources and specific domestic products like household kerosene, cooking gas, and CNG used for domestic purposes, indicating a shift toward incentivizing clean energy adoption.

According to the official document, “A surcharge is imposed at five percent on chargeable fossil fuel products provided or produced in Nigeria and shall be collected at the time a chargeable transaction occurs.”

A review of the total volume of petrol—both imported and refined domestically—in 2024 provides insight into the scale of potential revenue. According to recent data published by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the volume of Premium Motor Spirit consumed by Nigerians in the year totaled 18.75 billion litres.

Using an average petrol price of ₦850 per litre during the review period, the total consumer spending on petrol alone amounted to ₦15.93 trillion. Applying a 5% surcharge to this figure equates to ₦796 billion in yearly government earnings from petrol alone, without including diesel or other chargeable fossil fuel categories. When other fossil fuel products are factored in, the overall revenue from the surcharge is likely to surpass the ₦796 billion mark.

However, the newly introduced surcharge is already generating significant resistance from stakeholders within the downstream petroleum sector. Petroleum marketers and retailers have voiced strong opposition, warning that the policy could further drive up fuel prices across the country, placing a heavier financial burden on consumers.

Responding to the development, Chinedu Ukadike, spokesperson for the Independent Petroleum Marketers Association of Nigeria (IPMAN), emphasized that any additional tax burden will inevitably be transferred to consumers, as marketers are not in a financial position to absorb the cost.

“Any additional levy will reflect on the price of petrol across Nigeria. Marketers cannot absorb the additional burden,” Ukadike stated.

At the time of this report—Wednesday, July 30, 2025—fuel prices in major cities such as Lagos and Abuja ranged between ₦865 and ₦905 per litre at several filling stations, including MRS, Nigerian National Petroleum Company Limited (NNPC), AP Ardova, Optima, Bova, Ranoil, and AA Rano.

The ongoing policy shifts signal the government’s intention to diversify national income streams beyond crude oil exports and address the fiscal challenges caused by fuel subsidy removal, inflation, and exchange rate fluctuations. However, the growing cost of energy and public backlash may test the feasibility of these reforms in the coming year.