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Picture this scenario: It’s just after dawn at a filling station. A tired-looking commercial motorcyclist counts his crumpled notes carefully before handing them over. But the fuel attendant shakes his head gently and tells him the money will no longer buy what it used to. The rider forces a smile, but his eyes can see the reality that fuel has become costlier again by about N45 per litre.
You may feel this scenario applies to the bike man, who by the way will push the extra cost to his passengers, including probably you. But this piece will show how this policy affects you at an even larger scale. Yes, you.
According to the tax law which President Bola Tinubu signed into law on June 26, 2025, the five per cent fuel tax will kick off at a yet to be announced date. The policy focuses on fossil fuel products provided or produced in Nigeria.
Fossil fuel products include petrol, diesel, kerosene, aviation fuel, and Compressed Natural Gas (CNG). They are derived from the processing of 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 CNG.
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Tax law: Nigerians to pay additional N45 per litre of petrol
WHAT THE NEW LAW SAYS
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.
It states: “(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.”
A PEEP INTO WHAT GOVT COULD EARN
Using the volume of imported and refined petrol, an analysis showed that the government could earn more than N1 trillion annually through this policy. According to the data supplied by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) in its energy market reports, Nigerians consume petrol known as Premium Motor Spirit (PMS) more, followed by Diesel, Automotive Gas Oil (AGO), then aviation fuel also known as Aviation Turbine Kerosene (ATK).
The 2024 estimates of national consumption and refining capacity production data provided by NMDPRA showed that if Nigeria had applied the tax law in the previous year, it would have generated N796 billion. This N796 billion is purely for petrol, excluding diesel and aviation fuel, which are components of the new law.
A breakdown of the data from the NMDPRA showed that the total volume of petrol consumed by Nigerians reached 18.75 billion litres in 2024. The 18.75 billion litres of petrol translates to about N15.93tn, using the average price of N850 for a litre of petrol consumed in Nigeria during the period under review. Five per cent of N15.93tn represents N796bn, which is the tax revenue the Federal Government would have made from petrol alone.
This means that once the Federal Government implements this policy, the accruals from diesel and Aviation fuel would shoot up the revenue far higher.
For many, the policy arrives at the worst possible moment, a time defined by the painful shocks of subsidy removal and a string of other economic adjustments. The levy, which the administration insists is meant to raise funds for green energy projects and reduce reliance on fossil fuels, has sparked instant backlash.
Some citizens are calling for moderation in government spending and even an outright reversal of the policy, arguing that the masses cannot bear another hit.
HOW THIS WILL AFFECT NIGERIANS
In Kano, a commercial motorcyclist who spends about N25,000 weekly on fuel will now need N26,000 to cover the same distance. The extra N1,000, small as it seems, piles up week after week, leaving less for food, rent, or school fees.
In Ibadan, a market woman who tops up her small generator with N10,000 worth of petrol at intervals will be forced to pay N10,500. By the end of the year, she will have lost enough to restock her stall or cover her children’s levies.
For long-distance traders in Onitsha, the pinch is heavier. A bulk purchase of N25,000 will now take N26,250, cutting directly into profits and making it harder to reinvest in their businesses.
Civil servants, too, are not immune. A teacher in Ilorin who budgets N50,000 monthly for transport and family needs will watch that figure climb by N2,500. Over twelve months, that is N30,000 gone, the equivalent of school uniforms, food provisions, or part of a term’s tuition.
Artisans in Port Harcourt, such as welders, who run small generators for work, will also feel the squeeze. A refill of N10,000 becomes N10,500, and over time, that eats into their already unpredictable earnings.
Barbers in Benin City, whose shops depend on steady fuel for clippers and lighting, will see their N20,000 monthly fuel budget climb by N1,000, gradually reducing already slim margins.
Students are not spared either. In Zaria, a university undergraduate who spends N25,000 a month on fuel for his small car or generator will now need N26,250. The N1,250 difference, semester after semester, could have gone into textbooks.
For car owners, the new tax law is another dent in already expensive mobility. A civil engineer in Lagos who fills his SUV for instance with N40,000 worth of petrol twice a week will now part with N42,000 each time. Over the course of a year, the extra N8,000 every month adds up to nearly N100,000. This is the money that could have covered routine servicing or even insurance renewals.
Even those who drive smaller cars and typically spend about N15,000 per refill will now have to add N750 each time, and across several stops in a month, it quietly drains more from household budgets.
Air passengers, too, will not escape the ripple effect. Airlines depend heavily on aviation fuel, which falls under the category of chargeable fossil products. A Lagos-to-Abuja ticket currently priced between N200,000 and N280,000 could easily rise by an extra N10,000 to N14,000 once operators adjust to the five percent surcharge.
For frequent flyers like business executives, politicians and wealthy Nigeria families who travel often, the increase may look modest at first but with a huge impact over time.
From okada riders to traders, teachers to artisans, barbers to students, the new fuel tax is not just a percentage on paper. It is a daily battle for survival. Every stop at the pump will serve as a reminder that when this law is implemented, life will cost more even though incomes have not changed.
‘HOW REVENUE WILL BE USED’
The Chairman, Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has vowed that the fuel tax would help the country improve its tax infrastructure and reduce transport and logistics cost.
“I know some people have been giving wrong information about this.,, the intention is to earmark and dedicate the revenue from this tax into providing transport infrastructure that can reduce the cost of transporting items, logistics and overall bring down inflation for the Nigerian people.”
Yet another promise in the midst of several unkept ones, will Nigerians believe government this time around?
