The Federal Government is set to introduce a new 5% surcharge on fossil fuel products as part of the sweeping tax reforms President Bola Tinubu signed into law on June 26, 2025.
While the measure is not yet in effect, it has implications for consumers, businesses, and Nigeria’s energy future.
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The new tax, which is under the Nigeria Tax Act (NTA), has also raised questions about how and when it will apply as well as who will be affected.
EKO HOT BLOG provides answers on what the surcharge entails, when it will begin, and what exemptions apply.
What is the surcharge?
The five percent surcharge is an additional tax imposed on the retail price of chargeable fossil fuel products, such as petrol and diesel. In taxation terms, a surcharge is an extra fee added on top of the standard cost of goods or services.
According to the law, a fossil fuel product becomes chargeable at the earliest occurrence of supply, sale, or payment, whichever comes first. This point is legally defined as a “chargeable transaction.”
Take-off date yet to be announced
Although the law has been signed, implementation is pending. The NTA grants the finance minister the power to decide when the surcharge takes effect.
“The Minister may by an Order issued in the Official Gazette indicate the effective date of commencement of the administration of the surcharge,” the Act states.
As of now, no official commencement date has been announced. The current Minister of Finance and Coordinating Minister of the Economy is Wale Edun.
How will it be collected?
The Federal Inland Revenue Service (FIRS), which will be renamed the Nigeria Revenue Service (NRS) under the NTA, will administer and collect the surcharge on a monthly basis. FIRS will also issue guidelines for how the tax will be implemented. When the new law takes effect in full, FIRS will be renamed the Nigeria Revenue Service (NRS).
The surcharge is calculated based on the final retail price, not the wholesale or ex-depot rate. That means consumers could feel the impact at filling stations once the policy kicks in.
What products are affected?
The surcharge will apply to all chargeable fossil fuel products derived from coal, petroleum, or natural gas. These include:
- Petrol (PMS)
- Diesel (AGO)
What products are exempt?
To protect households and promote clean energy, the law exempts clean or renewable energy products from the surcharge. These include:
- Household kerosene
- Cooking gas (LPG)
- Compressed Natural Gas (CNG)
- Clean or renewable energy sources
The act defines “clean or renewable energy” as energy from solar, wind, hydropower, geothermal or plant and animal waste, which are naturally replenishing, produce little or no environmental pollution or greenhouse gas emissions, and do not deplete over time.
Broader tax reform
The surcharge is just one part of a sweeping tax reform agenda. Alongside the NTA, three other laws were signed:
- Nigeria Tax Administration Act
- Joint Revenue Board (Establishment) Law
- Nigeria Revenue Service (Establishment) Act
These laws are scheduled to take effect from January 1, 2026.
What this means for nigerians
Once implemented, the surcharge could push up the cost of petrol and diesel, affecting transport fares and general consumer prices. However, by excluding clean energy and household-use fuels, the government hopes to minimise hardship and encourage a shift toward renewable alternatives.
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The full impact will depend largely on how the policy is rolled out and when the finance minister chooses to start it.
Philip Ibitoye is a Special Correspondent with EKO HOT BLOG. Click here to find daily analysis and critical insight on trending issues in Lagos and other parts of Nigeria.
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