All you need to know about Tinubu’s 5% fuel tax

All you need to know about Tinubu’s 5% fuel tax

The 5% fuel tax, or surcharge, is a provision in Nigeria’s new tax laws that has generated public discussion.

In this article, TRIBUNE ONLINE gave a detailed breakdown of what the 5% fuel tax or surcharge entails, its origins, and its intended purpose.

Key Points of Clarification
Not a new tax: The 5% surcharge is not a new tax introduced by the current administration. It has been an existing provision under the Federal Roads Maintenance Agency (Amendment) Act, 2007 (FERMA Act). The new tax laws have simply restated and incorporated this provision for harmonisation and transparency within the broader tax reform framework.

Implementation is not immediate: While the new tax laws are expected to take effect in January 2026, the 5% fuel surcharge will not be implemented automatically. Its commencement requires a specific order from the Minister of Finance, which must be published in the Official Gazette. This measure is intended as a safeguard to ensure that the timing is carefully considered, taking into account current economic conditions.

Exemptions: The surcharge will not apply to all fuel products. Several products used by households are exempt, including:

1. Household kerosene

2. Cooking gas (LPG)

3. Compressed natural gas (CNG)

4. Other clean and renewable energy products

Purpose: The surcharge is designed to create a dedicated, sustainable fund for road infrastructure and maintenance. Proponents argue that a dedicated fund ensures predictable financing for roads, which can lead to:

1. Safer travel conditions

2. Reduced travel time and cost

3. Lower logistics costs and vehicle maintenance expenses

Relationship with subsidy removal savings: The presidency argues that while savings from fuel subsidy removal are significant, they are not sufficient to meet Nigeria’s massive and recurring road infrastructure needs. A dedicated fund, therefore, would complement these savings, ensuring that road projects are not left underfunded.

Alignment with tax reform goals: The government maintains that the surcharge does not conflict with its objective of easing the tax burden on citizens. The broader tax reforms have already reduced or suspended multiple other taxes, such as VAT on fuel, excise tax on telecoms, and the cybersecurity levy, while aiming for a more efficient and harmonised tax system.

Legal framework: The surcharge has been removed from the FERMA Act and incorporated into the new, forward-looking tax laws. This move is intended to ensure a clear and effective legal framework for sustainable road financing and to prepare for future challenges, such as climate change impacts, by promoting cleaner energy sources through the exemptions provided.