FG to Earn N796bn Annually from New 5% Fossil Fuel Surcharge

FG to Earn N796bn Annually from New 5% Fossil Fuel Surcharge

The Nigerian government is projected to generate an estimated N796 billion annually from a newly introduced 5 percent surcharge on locally produced and imported premium motor spirit (PMS).

This revenue will come into effect with the implementation of new tax laws, scheduled to begin on January 1, 2026.

President Bola Ahmed Tinubu signed four new tax bills into law on June 26, 2025.

The 5 percent fossil fuel surcharge is outlined in the Nigeria Tax Administration Act, one of the newly enacted laws.

According to the document, the surcharge targets fossil fuel products such as diesel, kerosene, aviation fuel, and compressed natural gas, while excluding renewable energy, household kerosene, cooking gas, and compressed natural gas.

“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,” the law states.

Based on data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Nigeria’s total petrol consumption in 2024 stood at 18.75 billion litres.

At an average pump price of N850 per litre, this translates to N15.93 trillion in total petrol expenditure, from which a 5 percent surcharge could yield N796 billion annually.

The government stands to earn even more when the surcharge on other fossil fuel products is factored in.

However, the move has sparked backlash from petroleum product marketers and retailers.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) warned that the additional tax burden will be passed on to consumers through higher pump prices.

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