Nigerians will begin paying a fresh 5% levy on petrol purchases starting January 1, 2026, after the Federal Government announced a new tax policy aimed at curbing fossil fuel dependence and funding renewable energy projects. The levy translates to ₦500 on every ₦10,000 spent on petrol, and it will be collected directly at the point of purchase.
According to government officials, the tax will not apply to kerosene, cooking gas, or Compressed Natural Gas (CNG), which are considered cleaner alternatives. Instead, the revenue will be ring-fenced for climate action programmes, renewable energy infrastructure, and Nigeria’s commitments under international climate change agreements.
The Ministry of Finance defended the policy, describing it as a “necessary transition tool” to drive Nigerians toward cleaner energy. Officials pointed to global practices, where similar carbon or fuel levies are used to discourage reliance on fossil fuels and encourage green innovation.
However, analysts warn the measure could deepen economic hardship. With petrol still central to transport, agriculture, and power generation, the 5% surcharge is expected to push up the cost of transportation and food, aggravating inflation already hovering above 30% as of mid-2025.
Critics also argue that the flat-rate tax is regressive, disproportionately affecting low-income households who spend a larger share of their income on transportation. Labour unions have already hinted at possible protests, with the Nigeria Labour Congress (NLC) describing the move as “ill-timed and insensitive.”
Fuel price increases remain a sore point for many citizens since the 2023 subsidy removal, which saw pump prices triple in a matter of weeks. While the government insists the new levy is about environmental responsibility, many Nigerians say they fear the immediate reality of higher fares, rising food costs, and further erosion of purchasing power.
As debate intensifies, the petrol consumption tax is set to become one of the most contentious policies of 2026, testing the Tinubu administration’s ability to balance climate commitments with the economic survival of millions. Whether the long-term promise of cleaner energy will outweigh the short-term pain for households remains a question Nigerians are bracing to answer.
