FG to introduce fuel tax when incomes improve

•Says proceeds’ll fund roads, cushion price shocks

The Federal Government said it would introduce a fuel tax when the economy stabilises and Nigerians’ incomes improve sufficiently to accommodate the additional cost.

Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, who made the disclosure, said revenue from the levy would support road infrastructure and the development of a fuel reserve to cushion future price shocks, stressing that implementation would require a ministerial order published in the Official Gazette.

Oyedele spoke during an interview on the sidelines of the 2026 International Monetary Fund and World Bank annual meetings in Bangkok, Thailand.

His comments come against the background of previous resistance by organised labour and business groups to the five per cent surcharge on chargeable fossil fuel products provided for in Nigeria’s tax framework. Its commencement remains subject to an order by the finance minister. He said introducing the tax while petrol was subsidised would have been counterproductive because the government would effectively have paid the charge itself. Imposing it immediately after subsidy removal, he added, would have placed additional pressure on Nigerians.

“The objective should be that instead of trying to suppress prices, which hasn’t worked for us, it hasn’t worked for any country in the world, not one. Instead of trying to suppress prices, think about how to grow income faster than prices rise.

“That’s how you bring prosperity and grow the middle class and that is exactly what we are doing as led by Mr. President himself.

“At the appropriate time, when the economy has stabilised and income level will be able to accommodate it, those taxes will come. Not because we want to impose taxes,” Oyedele said. Fuel pricing has remained a contentious issue since President Bola Tinubu declared that “fuel subsidy is gone” during his inaugural address on May 29, 2023.

The resulting increase in petrol prices drew opposition from organised labour, which demanded measures to cushion the consequences for workers and households.

The prospect of a further charge on petroleum products sparked another round of resistance in September 2025, when the Trade Union Congress rejected the proposed five per cent surcharge and threatened nationwide industrial action.

In a statement signed by its President, Festus Osifo, and Secretary-General, Nuhu Toro, the congress argued that another levy would deepen hardship for citizens already struggling with subsidy removal, rising living costs and naira depreciation.

“Strike action is firmly on the table,” the union warned.

Business groups have also expressed concern about the implications for production, transportation and consumer prices. The Association of Small Business Owners of Nigeria urged the government to prioritise relief for enterprises and households, warning that an additional fuel charge would worsen their financial burden.

Responding to the concerns at the time, then finance minister, Wale Edun, traced the surcharge to the Federal Roads Maintenance Agency Amendment Act of 2007. He said the provision was designed to finance road maintenance, with 40 per cent of the proceeds allocated to FERMA and 60 per cent to state road maintenance agencies.

The government maintained that its inclusion in the tax reforms was intended to harmonise existing provisions.

Explaining the proposed use of the revenue, Oyedele said the fuel reserve would “help moderate prices of fuel products if anything happens.”

He added that the government could temporarily waive the tax during future price shocks to ease pressure on consumers.

“The good thing is that the law says that tax cannot come into effect until there is a gazette. There has to be an order published in the gazette by the finance minister, which means we can’t do it in secret. Plus, we have no intention of doing stuff in the secret.

“At the appropriate time, it will be clear to everyone why it needed to be done and the benefits will be clear also to every Nigerian,” he said.

The existing surcharge framework exempts household kerosene, cooking gas, compressed natural gas and clean or renewable energy products.

As recently as June 16, 2026, the government dismissed reports that it was introducing fresh taxes on petroleum products following recommendations in the IMF’s Article IV consultation report. It said the VAT waiver on petroleum products remained in place and that no process to activate the fuel surcharge was then under consideration.

Comparing Nigeria’s position with other countries, Oyedele said taxes accounted for between 20 and 80 per cent of pump prices in some jurisdictions, while several African countries imposed between six and 10 different charges on petroleum products.

He also explained the sequencing of the petrol subsidy removal and foreign exchange reforms, saying the government initially removed support for petrol prices before allowing the naira to adjust gradually.

According to him, exchange-rate movements significantly influenced petrol prices, requiring the government to manage the transition with consideration for its impact on Nigerians.

“That is the reason why there was still a bit of subsidy in 2023. It was to manage that process because you need to be mindful of the impact on the people.”

Oyedele said petrol subsidy was completely removed in October 2023, when government support for both petrol prices and foreign exchange was no longer in place.