The recent signing of the Nigeria Tax Act (NTA) by President Bola Ahmed Tinubu on June 26, 2025, has sent ripples of concern across Nigeria, particularly with its introduction of a 5% tax on every litre of petrol and diesel starting January 1, 2026. This new levy, part of a broader tax reform package, has stirred unease among Nigerians already burdened by soaring fuel prices and economic challenges. On the streets of Abuja, citizens voiced their frustrations, painting a vivid picture of the struggles they anticipate as the policy looms.
The NTA’s 5% surcharge on fossil fuels, including petrol, diesel, and aviation fuel, aims to reduce carbon emissions and fund sustainable development under the Nigeria Climate Change Act 2021. Exemptions for cleaner energy sources like household kerosene, cooking gas (LPG), compressed natural gas (CNG), and renewable energy products signal the government’s push toward a greener future. President Tinubu, speaking at the signing ceremony in Abuja, described the reforms as a step toward fairness and economic modernisation.
“These reforms will protect low-income households and create a path of equity and fairness in our economy,” he said, noting that the policy would help boost Nigeria’s tax-to-GDP ratio from 10% to 18% by 2026.
Yet, for many Nigerians, the promise of long-term sustainability feels distant compared to the immediate financial strain. The 2023 fuel subsidy removal already pushed petrol prices from ₦185 to over ₦900 per litre in many areas, according to data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). With Nigeria consuming 18.75 billion litres of petrol in 2024, valued at ₦15.93 trillion at an average price of ₦850 per litre, the new 5% levy could add at least ₦50 per litre. This translates to an estimated ₦796 billion in annual revenue from petrol alone, excluding diesel and aviation fuel.
In Kurudu, a bustling area of Abuja, Fairview Africa spoke with residents whose concerns reflect the broader national sentiment. Idris Okada, a transporter and chairman in Kurudu, expressed deep frustration with the impending tax.
“As a transporter, it’s not easy. Even with the recent price, we are buying fuel for ₦950 to ₦980. Now government wants to come add another money again,” he said. Okada, a father struggling to provide for his family, explained the ripple effects of rising fuel costs. “I’m managing with my family for the amount we dey buy now. Before, I suppose dey save money, but sake of the price, I no fit save again. I dey do contribution, feeding, school fees—everything dey high. And now government wan come add another money. For my own opinion, I dey beg President make he do something, make he pity us. Everybody dey complain.”
The economic landscape in Nigeria significantly amplifies concerns about the recently introduced fuel levy. According to the National Bureau of Statistics (NBS), Nigeria’s inflation rate surged to 32.15% in August 2025, primarily driven by escalating costs in food and energy sectors. This sharp rise in inflation continues to strain household budgets, further exacerbating financial challenges for many Nigerians.
A staggering 60% of the population, approximately 133 million Nigerians, live below the poverty line, as highlighted by the World Bank in 2023. The introduction of the new fuel levy is seen by many as a policy that could worsen these existing economic hardships. The Nigeria Labour Congress (NLC), through its spokesperson Benson Upah, has voiced concerns about the potential for this levy to deepen poverty, warning that it “risks pushing more people into hardship.”
This economic context suggests that the levy not only threatens the livelihood of the already vulnerable population but also has the potential to further destabilize an already fragile economy. The combination of high inflation, low income, and escalating costs makes the levy a particularly pressing issue for those struggling to make ends meet.
At Kurudu market, trader Amechi Onyan highlighted how the tax could inflate transport costs, affecting his business and customers.
“This decision of government will affect me in every way round. For instance, the place we go for ₦200, by 2026 it may increase to ₦500 or ₦1000,” he said. Onyan appealed for relief, adding, “I’m begging the government to reduce fuel price, not to increase it.”
Judith David, a resident of Abuja, echoed these sentiments, warning of broader consequences. “This will not help us Nigerians. We suffer it. If you look at the cost of things in the market, they are very high due to the recent price of fuel. Now for government to increase next year, it will not be easy,” she said. David expressed concern about potential unrest, stating, “Even what the government is trying to achieve in doing this will really cause commotion in the country. The government should reconsider, please.”
The NTA’s broader framework offers some relief, exempting small businesses with turnovers below ₦100 million from company income tax, capital gains tax, and a new 4% development levy. It also removes VAT on essentials like food, healthcare, and education to ease costs for low-income households. However, these measures may be overshadowed by the fuel levy’s impact, particularly in a country where over 80% of households and businesses rely on petrol or diesel generators due to an unreliable electricity grid, as noted in a 2024 International Energy Agency report.
The Nigerian government has defended the proposed carbon tax levy, emphasizing it as a crucial step toward achieving both fiscal stability and environmental sustainability. Drawing parallels with successful global models, particularly Sweden’s carbon tax implementation in the 1990s, the government believes this initiative will bolster Nigeria’s long-term financial health while addressing urgent climate concerns.
In a statement on June 26, 2025, Zacch Adedeji, Executive Chairman of the newly established Nigeria Revenue Service (NRS), underscored the dual purpose of the levy: “This is about building a sustainable future while meeting our fiscal needs.” The NRS, which has replaced the Federal Inland Revenue Service, is tasked with overseeing the effective implementation of the tax system, which is expected to raise revenue for critical climate adaptation projects and the promotion of clean energy technologies.
The revenue generated from the carbon tax will be earmarked for specific initiatives aimed at combating climate change, fostering the growth of green jobs, and supporting sustainable development goals. In line with these efforts, Nigeria has seen a notable increase in its solar energy capacity, reaching 385.7 MWp in 2024. This positions the country as the fourth-largest adopter of solar energy in Africa, reflecting its potential to harness renewable energy sources to mitigate the environmental impact of fossil fuel consumption.
Despite these ambitions, enforcement challenges loom. The NRS will require monthly filings from fuel sellers, with penalties of up to ₦10 million for non-compliance. Chinedu Okonkwo, National President of the Independent Petroleum Marketers Association of Nigeria, called for clear guidelines, stating, “We need clear guidelines to avoid harassment by tax officials.”
Public sentiment, as seen on platforms like X, reflects widespread frustration. A user, @NaijaCitizen23, posted, “Fuel is already too expensive, and now they’re adding another tax? This government doesn’t care about us,” capturing a sentiment shared by many. Rights groups have raised concerns about potential unrest, recalling the protests that followed the 2023 subsidy removal.
As January 2026 approaches, Nigerians like Idris, Amechi, and Judith brace for higher costs in an economy already stretched thin. The levy’s success hinges on transparent enforcement and tangible investments in alternatives like CNG and renewables.
