Nigeria, Africa’s largest oil producer and the 15th largest globally, stands at a pivotal moment in its fiscal evolution. With the passage of the Tax Administration Act on June 26, 2025, the government has embarked on long-overdue reforms aimed at improving tax collection and reducing dependence on volatile oil revenues. These initiatives, including the unification of tax codes and the simplification of compliance, are commendable and reflect a genuine effort to modernise the tax system.
One of the most compassionate and economically sound decisions under this new framework was the removal of the 5% excise duty on telecommunications services. By scrapping the levy on voice and data services, the Federal Government demonstrated a clear understanding that taxing essential digital infrastructure undermines inclusion, dampens innovation and stifles growth in a sector central to modern economic life. That move deserved and received widespread praise.
Yet within this same reform package lies a reactivated 5% fuel surcharge, originally introduced in a 2007 law. Its revival threatens to undermine the very progress the administration is trying to achieve by placing an unnecessary and disproportionate burden on ordinary Nigerians.
A Regressive and Untimely Levy
Since the removal of petrol subsidies in May 2023, fuel prices have soared at a pace unprecedented in Nigeria’s history. Data from the National Bureau of Statistics shows that average petrol prices rose by more than 220% between May 2023 and May 2024, from roughly ₦238 per litre to more than ₦770. In several states, particularly in late 2024 and early 2025, pump prices climbed above ₦1,000 per litre. This escalation has been devastating for transport operators, small businesses, rural dwellers and low-income households that depend heavily on petrol for their livelihoods.
The Nigeria Labour Congress estimates that transportation now consumes between 25% and 40% of household income in many low-income communities. With headline inflation above 30% and food inflation at times exceeding 40%, the introduction of a 5% surcharge on petrol, diesel and other refined products would only intensify pressure on a population already pushed to breaking point. Whether described as a reinstated duty or a long-delayed enforcement, its practical effect is clear: higher fuel prices and deeper hardship.
Who Bears the Brunt?
The fuel surcharge is regressive because it levies the same amount per litre on every consumer regardless of income. A corporate executive and a roadside trader pay the same charge at the pump. With more than 88% of Nigerians working in the informal sector, as the Nigerian Economic Summit Group notes, most citizens already fall outside the formal tax net. These households allocate a significant share of their income to transportation and food, two categories highly sensitive to fuel price fluctuations. Any increase in fuel costs therefore erodes their living standards directly and immediately.
Rural communities, which often lack reliable public transport and must travel long distances for education, markets or healthcare, would fare even worse. For them, fuel is not merely a convenience; it is a lifeline. A surcharge would deepen existing inequalities and widen the rural-urban gap.
Nigeria: A Regional Outlier
In comparative context, Nigeria’s proposed surcharge is unusual. Most major oil-producing countries, particularly those without strong social safety nets, do not impose direct fossil-fuel surcharges at the pump. Nations such as Saudi Arabia, Russia and the United Arab Emirates maintain subsidised or minimally taxed fuel regimes to protect households and maintain economic stability.
Nigeria’s situation is further complicated by its dependence on imported refined products. According to the Nigerian Midstream and Downstream Petroleum Regulatory Authority, the country spent more than ₦3.5 trillion on fuel imports during the second half of 2023. Nigerians already pay inflated prices driven by foreign exchange pressures and insufficient domestic refining. A surcharge effectively penalises citizens for systemic inefficiencies beyond their control.
Infrastructure Funding: But at What Cost?
Proponents of the surcharge argue that it will generate dedicated revenue for road infrastructure. Government projections estimate that a 5% levy could yield roughly ₦796 billion annually, based on NMDPRA’s figures showing annual PMS consumption of 18.5 to 19 billion litres and average pump prices of ₦800 to ₦900 per litre.
While the revenue potential is significant, Nigeria’s history raises valid concerns. Road maintenance institutions have long been troubled by inconsistent funding, weak oversight, opaque processes and limited accountability. Without substantial reforms to ensure transparency and measurable outcomes, earmarking nearly ₦800 billion for infrastructure does not guarantee improved roads. What it does guarantee is an immediate and unavoidable increase in living costs for citizens.
Legal Room for Rethinking
Importantly, the Tax Administration Act’s operational date of January 1, 2026 does not automatically activate the surcharge. The law requires a separate commencement order issued by the Minister of Finance and published in the official gazette. Finance Minister Wale Edun and Tax Reform Committee Chairman Taiwo Oyedele have both stated publicly that there are no current plans to trigger the surcharge.
This legal requirement creates a crucial pause and an opportunity for responsible judgment before imposing a tax with far-reaching economic consequences.
Broaden the Tax Base, Not the Burden
Nigeria’s need to increase revenue is undeniable. The country’s tax-to-GDP ratio remains one of the lowest globally. The International Monetary Fund puts it at 9.4%, the FIRS and NBS review places it at 10.86% and the OECD’s Revenue Statistics in Africa report records about 8%, compared with a continental average of 16%. This gap underscores the urgency of reform but does not justify taxing essential commodities that disproportionately affect the poor.
More sustainable and equitable options exist. Strengthening VAT collection among medium-to-large informal enterprises, enhancing compliance among high-net-worth individuals, enforcing property and wealth taxation, reforming customs processes to close leakages and ensuring transparent use of subsidy removal savings, which exceed ₦4 trillion annually, would expand the tax net without inflicting further hardship on vulnerable Nigerians.
Why the Fuel Surcharge Should Be Dropped
The surcharge is unfair because it burdens those least able to absorb rising costs. It is unnecessary in light of the fiscal space created by subsidy removal, which, if managed responsibly, is more than adequate to support infrastructure development. It is inflationary, as any increase in fuel prices reverberates across the entire economy from transport to food, manufacturing to healthcare. Its timing is dangerous, given ongoing price instability and stagnant wages. It also sets Nigeria apart from other oil-producing nations, most of which avoid imposing direct surcharges on consumers.
Do Unto Petrol What Was Done to Telecom
The abolition of the 5% telecom excise duty was celebrated because it reduced pressure on households and strengthened a vital sector. The same reasoning applies even more strongly to petrol. Fuel is the backbone of Nigeria’s economy, and raising its price through a surcharge would undermine productivity, weaken household welfare and damage public confidence in the broader reform agenda. If the government seeks to promote growth and restore trust, taxing an essential commodity is counterproductive.
Conclusion: Reform, But Not Regression
Nigeria must embrace tax reform that is fair, growth-enhancing and socially responsible. Although the fuel surcharge may have been conceived as a practical revenue measure, its implementation would deepen inequality, heighten inflation and compromise the credibility of ongoing reforms. The National Assembly, the Ministry of Finance and the Presidential Tax Reform Committee now have an opportunity to demonstrate sound judgment by shelving the surcharge entirely.
Nigeria cannot build its future by imposing disproportionate burdens on those already bearing the weight of economic hardship. The country needs a revenue system that protects the vulnerable, strengthens public trust and supports sustainable development, not one that taxes struggle.