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Manufacturers and industry experts have warned that the federal government’s newly introduced Green Tax (environmental tax) could raise production costs, worsen inflation and erode the competitiveness of local manufacturers unless proceeds are transparently reinvested in cleaner technologies and sustainable industrial projects. While backing the policy’s environmental objectives, they urged the government to channel revenues into renewable energy, recycling, biodegradable materials and low-carbon technologies, arguing that taxing businesses without providing affordable alternatives would undermine both industrial growth and Nigeria’s transition to a greener economy.
The federal government introduced a Green Tax surcharge in April 2026 as part of its fiscal policy measures, with implementation commencing on July 1, 2026. The policy imposes a levy of between two and four per cent on high-engine vehicles, while exempting electric vehicles (EVs) and locally manufactured vehicles. To cushion the impact, the government also reduced the import levy on new and used vehicles by half.
With the policy, Nigeria joins a growing number of countries using fiscal measures to discourage environmentally harmful activities and encourage sustainable production and consumption.
Beyond revenue generation, the policy is intended to encourage businesses and consumers to adopt cleaner alternatives by making environmentally damaging practices more expensive. While many stakeholders support the environmental objective of the policy, they argued that its success will ultimately depend on how the government deploys the revenue generated.
Commenting on the policy, Project Lead of the Calabar and Gulf of Guinea Municipal and Trade Centre Limited by Guarantee and former president of the Calabar Chamber of Commerce and Industry (CALCCIMA), David Etim, said manufacturers need practical and affordable alternatives before they can significantly reduce their dependence on single-use plastics, carbon-intensive operations and supply chains.
He urged the federal government to ensure that Green Tax proceeds are transparently invested in environmental projects and cleaner production technologies instead of becoming an additional burden on industry.
According to him, it is still too early to determine the impact of the tax on manufacturers’ production costs and competitiveness since implementation only began on July 1.
“I have really no problem with the environmental tax. What I am looking out for is the application of that tax to create a counterbalance,” he said.
Etim stressed that the effectiveness of the policy would depend on whether the government channels the revenue into research and development of biodegradable and recyclable plastics, expansion of renewable energy, particularly solar power, recycling programmes, and cleaner technologies such as electric and hydrogen-powered vehicles.
“If you tax me for using single-use plastic, what’s my alternative? That’s the question we should be asking the government,” he said.
He also advocated increased funding for universities and research institutions to accelerate the development of sustainable industrial solutions.
According to him, the debate should not focus solely on manufacturers’ costs but also on the long-term environmental and public health benefits of reducing pollution.
“The deployment of those tax revenues is a critical component that, if properly done, would feed back to the taxpayer,” he added.
On concerns about competitiveness, Etim pointed to the government’s exemption of electric vehicles from import duty as an incentive aimed at encouraging cleaner technologies and balancing the impact of the Green Tax.
However, he maintained that more time is needed before assessing whether the policy is achieving its objectives.
“We need to give it time to evaluate the utilization of those tax revenues before we can determine whether it is beneficial or not,” he said.
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In his views, a member of the Manufacturers Association of Nigeria (MAN) Export Group, Imokhai Ehimigbai, said the policy could benefit businesses involved in compressed natural gas (CNG), as it is likely to increase demand for the cleaner fuel.
He, however, warned that manufacturers would still face higher logistics costs because most haulage vehicles used to distribute goods currently run on diesel.
“The Green Tax will directly increase manufacturing production and logistics costs by adding financial penalties to carbon-intensive operations and supply chains,” he said.
Ehimigbai urged the government to reduce the cost of converting petrol-powered vehicles to CNG, noting that the current conversion cost of between N800,000 and N1 million remains prohibitive.
Meanwhile, Small and Medium Enterprises (SMEs) expert and member of the Lagos Chamber of Commerce and Industry (LCCI), Daniel Dickson-Okezie, called for the suspension of the Green Tax, arguing that it could worsen inflation and increase the cost of doing business.
He said although the reduction in vehicle import levy provided some relief, it was insufficient to offset the additional burden created by the Green Tax. According to him, prices of vehicles, machinery and other affected assets have already increased, with manufacturers expected to transfer the higher costs to consumers.
Dickson-Okezie noted that despite the policy’s environmental objective, Nigeria remains heavily dependent on internal combustion engine (ICE) vehicles, while the adoption of electric vehicles is still very low.
He added that most manufacturers continue to rely on ICE-powered vehicles for transporting goods, making the immediate transition to cleaner alternatives difficult.
According to him, while it is still too early to fully evaluate the policy, early indications suggest it is increasing production costs and could further fuel inflation.
“Manufacturers are bound to pass the additional costs on to consumers, leading to more expensive goods.
“Higher production costs could make Nigerian products less competitive compared to imports from countries with lower environmental taxes.
“Small and medium-sized manufacturers may struggle more than large firms because they have fewer resources to invest in cleaner technologies. Already, the cost of machines has gone up since the introduction of the tax,” he said.
Dickson-Okezie also criticised the implementation process, saying there was inadequate stakeholder consultation and insufficient notice before the policy took effect.
He argued that extending the tax to cargo already in transit amounted to a retrospective fiscal burden, exposing importers, customs agents and businesses to unexpected financial losses.
As a way forward, he urged the federal government to suspend implementation of the Green Tax and introduce a transition period that would allow businesses to adjust. He also recommended conducting a comprehensive assessment of the policy’s economic impact at the end of the current quarter before resuming full implementation.
