7 Things You Must Know About Nigeria’s 5% Fuel Surcharge (Jan 1, 2026): How It Will Hit Your Wallet — and 12 Ways to Protect Yourself

INTRO — why you should read this now

Quick note up front: the 5% charge is expressly written into Chapter Seven (sections 159–162) of the new Nigeria Tax Act, 2025 as a “surcharge imposed at 5% on chargeable fossil fuel products provided or produced in Nigeria..." The finance minister by virtue of his power had stated that implementation of the 5% fuel tax (as it’s come to be known) would commence on 1 January 2026.

Having said that: Picture your monthly transport/energy bill like a leaking bucket. For months you’ve been scooping water — wages, transfers, pay cheques — into it. Now someone told you they’re dropping a small hole in the bucket called “5% fuel surcharge.” It sounds small. But leaks multiply across weeks and months. If you don’t patch or reduce the flow, that “small” hole can leave your household or business waterless. That’s the simple reality behind the 5% surcharge: it’s a percentage added to the retail price of (most) fossil-fuel products sold in Nigeria. It’s small as a percent, but when applied to high pump prices and heavy usage, the real-world burden can be heavy. In this article I will walk you through seven must-know facts, and the practical action plan you can use now to soften the blow — legally.

QUICK FACTS (at-a-glance)

• What it is: A 5% surcharge on chargeable fossil fuel products (explicit in Chapter 7, sections 159–162 of the Nigeria Tax Act 2025).

• When it starts: The law states a commencement order will set the effective date; the government has indicated implementation will be staged with a target commencement 1 January 2026, but a formal Gazette order is required; the finance minister has clarified there is no automatic/instant implementation without that order.

• How it’s calculated: Surcharge is computed on the retail (pump) price of chargeable fossil-fuel products; the chargeable transaction is “supply, sale or payment — whichever occurs first.”

• Collection/administration: The tax authority (i.e., Nigeria Revenue Service (NRS) as it’s called now based on the new Nigeria Tax Act, 2025) to administer and collect the surcharge on fossil fuel products in Nigeria. Section 3 (1a) of the Nigeria Tax Act, 2025 expressly stated that the Nigeria Revenue Service (in this Act referred to as “the Service”) which established under the Nigeria Revenue Service (Establishment) Act, 2025, shall have exclusive responsibility to administer...surcharge on fossil fuels”

• Exemptions: Clean/renewable energy, household kerosene, cooking gas (LPG) and compressed natural gas (CNG) are explicitly exempt.

1. What the law actually says

The short official version (translated from the Act): A 5% surcharge will be applied on chargeable fossil fuel products when a chargeable transaction happens. The statute defines the transaction as the first of supply, sale or payment. The surcharge is calculated on the retail price. The Minister can announce when the surcharge will start (via Gazette), and the tax authority will collect monthly. Some products are excluded: renewables, household kerosene, LPG (cooking gas) and CNG.

Why these details matter:

• “Retail price” means the surcharge is applied to the final pump price; if pump prices rise, the 5% increases in absolute naira value.
• The “supply, sale or payment” rule could mean the surcharge is triggered at different points in the supply chain depending on where the product changes hands — real-world logistics matter.
• Ministerial commencement is required: the law exists now, but it’s been mentioned to commence on 1 January, 2026.

2. Who pays, who collects, and how (practical mechanics)

Who physically pays? End consumers at the pump or whoever buys the fuel product in a chargeable transaction. In practice, petrol/diesel customers paying at filling stations will see the surcharge included in the pump price (or as a visible line item depending on retailer practice and regulation).

Who collects? The tax authority (i.e., Nigeria Revenue Service) via monthly collection. The Act empowers the Service to issue administrative rules.

Point of charge: Since the law uses retail price and "supply/sale/payment", expect collection at retail sale or at the point a distributor sells to retailers (practical implementation to be clarified by regulations).

3. Who and what is exempt (and what ‘clean energy’ means)

The law explicitly excludes:

• Clean or renewable energy products (defined to include solar, wind, hydro, geothermal, and plant/animal waste energy sources).
• Household kerosene (often used for domestic lighting/cooking in lower-income settings).
• Cooking gas (LPG).
• Compressed natural gas (CNG).

This means switching some uses to LPG or CNG (where practical and available) could help you avoid the surcharge. The law’s design nudges toward cleaner fuels, at least on paper — but availability, infrastructure, upfront conversion costs, and adoption barriers are very real in many parts of Nigeria.

Table 1: Chargeable vs. Exempt Fuel Products

Product	Surcharge Applied?
Petrol	✅ Yes
Diesel	✅ Yes
Household Kerosene	❌ No
Cooking Gas (LPG)	❌ No
Compressed Natural Gas (CNG)	❌ No
Solar, Wind, Hydropower	❌ No

4. Exactly how much will it add to pump price?

Let’s do clear, precise examples so the numbers are not vague. Rule: surcharge = retail price × 5%. Examples using recent pump price benchmarks (regional pump prices vary; we use published figures as examples):

Example A — Dangote announced price (recent): ₦820 per litre (Dangote’s local pricing move was widely reported as a real market price point).

• Calculation: ₦820 × 0.05 = ₦41.00

• Surcharge per litre: ₦41.00

• New retail price if the surcharge is applied directly and fully passed through = 820 + 41 = ₦861.00

Example B — Common Lagos pump point (published example): ₦841 per litre.

• Calculation: ₦841 × 0.05 = ₦42.05

• Surcharge per litre: ₦42.05

• New retail price = 841 + 42.05 = ₦883.05

Example C — Earlier reported higher pump: ₦998 per litre (Reuters reported N998 after subsidy changes in 2024).

• Calculation: ₦998 × 0.05 = ₦49.90

• Surcharge per litre: ₦49.90

• New retail price = 998 + 49.90 = ₦1,047.90

Table — quick comparison

Example pump price (₦/L)	5% surcharge (₦/L)	New price (₦/L)
820	820 × 0.05 = 41.00	820 + 41 = 861.00
841	841 × 0.05 = 42.05	841 + 42.05 = 883.05
998	998 × 0.05 = 49.90	998 + 49.90 = 1,047.90

(Sources for sample pump numbers: Dangote/market reports and Reuters coverage for sample historical benchmarks.)

What this looks like for a commuter

If you drive 40 litres per week (≈160 litres/month — a reasonable estimate for many urban commuters with daily driving):

• At ₦820/L, surcharge per litre ₦41 → monthly extra = 41 × 160 = ₦6,560 per month.
• At ₦841/L, surcharge per litre ₦42.05 → monthly extra = 42.05 × 160 = ₦6,728 per month.
• At ₦998/L, surcharge per litre ₦49.90 → monthly extra = 49.90 × 160 = ₦7,984 per month.

Monthly arithmetic (step-by-step):

• 41 × 160 = 6560 (₦6,560)
• 42.05 × 160 = 6728.0 (₦6,728)
• 49.90 × 160 = 7984.0 (₦7,984)

So even though the surcharge is “only” 5%, the monthly household impact can run into thousands of naira — and that’s before second-round effects (transport fare increases, food price pass-through, logistics cost hikes).

5. How big is the government’s prize (and why that matters)

Analysts and press reports have quoted government projections that the 5% surcharge on refined petroleum products could bring in roughly ₦~796 billion annually (figures vary based on pump prices and volumes sold). This gives you a sense of scale — for government finances, that’s a meaningful revenue stream; for households, it explains why the government sees the measure as revenue mobilization plus climate incentive.

Why that matters in practice:

• Once reported revenue targets exist, policy incentives to implement and collect the surcharge rise. That can mean stricter enforcement, faster administrative rollout, and pressure on market participants (refiners, marketers) to pass costs to consumers.
• Political response will also factor — civil society, labour unions and consumer groups have signalled opposition; the government has already said it will not issue a commencement order without deliberation despite the fact that the commencement date has been fixed for 1 January, 2026. Meanwhile, expect negotiations, clarifications, and possibly phased implementation because as they say ‘every cow dreads the sight of a knife’.

6. When is it to commence?

It’s been announced that the full implementation of the 5% surcharge on fossil fuel (i.e., fuel tax) will commence on 1 January, 2026. The Minister has also emphasized stakeholder consultations and that the administration is mindful of cost-of-living pressures Expect the Service to issue administrative regulations on how to compute, report and remit the surcharge (monthly). Also expect clarifications on point of collection, invoicing and whether retailers must show the surcharge as a separate line item on receipts. The bottom-line is: Don’t be surprised by public debate, but do prepare as if the surcharge will be implemented — the legal scaffolding exists and officials have set a start window (Jan 1, 2026) even while promising consultation and a formal Gazette step.

7. Practical, legal ways to prepare and protect your wallet or business

I cannot advise you with tax evasion or illegal avoidance. Therefore, the suggestions below are legal, practical ways to reduce reliance on costly fuel or to restructure usage and costs. If you’re a business, consult a trusted tax adviser or lawyer before changing tax accounting. Now — the plan.

Household & Commuter actions (short-term and medium-term)

1. Track your usage now. Know how many litres you use weekly and monthly. (We used 160 L/month as an example.) This is the single best first step.
• Why: without a baseline you can’t measure savings.
2. Re-budget immediately. If your monthly fuel bill will rise by ₦6–8k (or more), move that into your budget now — treat it like a locked expense until you reduce consumption.
3. Carpool & rideshare. Share trips to work — two people sharing a car halve the per-person fuel burden.
• Example: If surcharge adds ₦41/L and you save 20 L/week by carpooling, that’s 41 × 80 = ₦3,280 savings/month per person (if shared).
4. Switch commuting days / remote work. Ask for flexible hours or remote days (even 1–2 days/week reduces monthly fuel).
5. Adopt fuel-efficient driving habits. Slow acceleration, maintain tyre pressure, remove roof racks, avoid idling — small changes lower litres consumed.
6. Consider LPG/CNG where possible. The law exempts LPG and CNG — if conversion is feasible, calculate payback time for converter costs vs. recurring savings. (Availability and safety standards matter.)
7. Public transport when practical. Use buses or mass transit on high-demand days — collective travel can be significantly cheaper.

Small business & logistics (short-term and structural)

1. Review your pricing and contracts now. If you cannot absorb cost increases, start communicating planned adjustments to clients now — transparency reduces shock later.
2. Negotiate fuel clauses for long contracts. Add or implement fuel escalation/de-escalation clauses tied to pump price indices.
3. Optimize routes & consolidate deliveries. Route planning software or simple consolidation of deliveries reduces vehicle time & fuel.
4. Fleet management & telematics. Where possible, adopt fuel-monitoring to identify wasteful routes/driving.
5. Bulk procurement & fuel cards. Negotiate better deals with suppliers or use fuel cards that sometimes offer small discounts and easier tracking.
6. Consider partial mode shift to exempt fuels. For certain fleets (e.g., taxis), conversion to CNG or using LPG for generators may make sense — run the numbers.

Medium/Long-term (households + businesses)

1. Explore efficient vehicles & EVs where practical; total ownership cost can be lower over several years. Note: charging infrastructure and electricity reliability matter in Nigeria.
2. Invest in solar at home or business to reduce generator/fuel needs. Solar for lighting and some appliances reduces kerosene/generator diesel use.
3. Lobby & collective action. Join business groups, trade unions, or consumer associations to demand transparency on how surcharge revenue will be used (e.g., for roads) and to ask for targeted reliefs for vulnerable groups.
4. Financial buffers & emergency funds. Build a small buffer equivalent to 1–2 months’ fuel expense to absorb shocks during the rollout.

Two pragmatic checklists you can use today

Household checklist (do these this week)

• Record last 3 months’ fuel receipts (litres + naira).
• Calculate your monthly average litres consumed.
• Multiply that by a sample surcharge (5% × current pump price) to see monthly impact.
• Apply immediate fuel-savings (carpool, 1 remote day per week).
• Adjust monthly budget for the surcharge baseline.

Small business checklist (do these this month)

• Map all fuel-dependent cost lines (transport, generators, deliveries).
• Update invoices/contracts with a draft fuel escalation clause.
• Run a route consolidation pilot for 2 weeks.
• Talk to accountant about whether the surcharge will be shown separately on invoices and how to account for it in pricing.
• Consider small CAPEX for fuel-efficient vehicles or telematics for quick ROI.

Frequently asked questions (short answers)

Q: Is this the same as the removed subsidy?
A: No. The surcharge is a distinct statutory charge in the Tax Act; subsidy removal was a separate policy. The surcharge is a small percentage on top of the retail price — but it compounds the overall burden created by subsidy removal.

Q: Can I avoid paying it by buying in bulk or from specific sellers?
A: The law targets chargeable fossil fuel products and uses retail price as the base; how it’s applied to bulk transactions depends on administrative regulation. In practice, most users will face the surcharge at the point of purchase in some form. Trying to “skip” the surcharge is not advisable: it risks illegal evasion. Instead follow the legal mitigation tips above.

Q: Will this give money for roads?
A: Historically, previous versions of similar provisions earmarked percentages for road maintenance agencies. Officials have said proceeds were envisaged for road upkeep (some past drafts and commentary show allocation intentions). Watch for implementation regulations and budgetary allocations that will confirm how proceeds will be used.

Action plan (what I recommend you do right now)

1. Record & calculate (today): find 3 months of fuel receipts; compute baseline litres/month.
2. Estimate surcharge (today): multiply baseline litres by 5% × current pump price to get likely monthly impact.
3. Quick savings (this week): arrange carpool, ask for 1 remote day, slow down driving style, check tyre pressure.
4. Business tasks (this week): run price sensitivity on your invoices, add fuel escalation clause to contracts, speak with your accountant.
5. Advocacy (this month): join relevant business or consumer groups to monitor regulatory clarifications and demand transparency on use of proceeds.
6. Plan longer term (1–12 months): evaluate LPG/CNG options, solar for home, vehicle replacement planning.

Conclusion — a straight message

Yes — it’s called “just 5%.” But the real-life effect depends on the price base and how often you refuel. Because the surcharge is computed on retail prices, in a high-price environment that 5% quickly becomes a significant monthly burden for households and businesses. The law exists; the government has signalled a likely implementation window (with a formal commencement order requirement), and the public debate will intensify. The smartest response is not to panic but to prepare: measure your fuel use, adjust budgets, reduce consumption where possible, and implement low-cost fuel efficiencies. If you run a business, think pricing, contracts and supply-chain fixes now.