Anger Grows as FG Considers Fuel Tax Amid Rising Cost of Living

The Federal Government’s plan to introduce a fuel tax has triggered criticism from Nigerians, business owners and public affairs analysts, who fear the proposed levy could worsen the economic hardship caused by rising fuel prices and the removal of the petrol subsidy.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, recently disclosed that the government intended to introduce the tax when the economy had stabilised and Nigerians’ incomes had improved sufficiently to accommodate the additional cost.

However, many Nigerians have rejected the explanation, arguing that the government should focus on easing the burden on households and businesses rather than introducing another charge on petroleum products.

Oyedele made the disclosure during an interview on the sidelines of the 2026 International Monetary Fund and World Bank annual meetings in Bangkok, Thailand. He said revenue from the proposed levy would support road infrastructure and the development of a fuel reserve to help cushion the effects of future price shocks.

He explained that implementing the tax while petrol was subsidised would have been counterproductive because the government would effectively have borne the cost. Introducing it immediately after subsidy removal, he added, would also have placed additional pressure on consumers.

The minister said the government’s approach was to grow incomes faster than prices increased, arguing that this would promote prosperity and expand the middle class.

He maintained that the tax would only take effect when economic conditions and income levels could accommodate it, adding that implementation would require a ministerial order published in the Official Gazette.

Oyedele also said the proposed fuel reserve could help moderate petroleum product prices during future disruptions. According to him, the government could temporarily waive the tax during periods of price shocks to reduce the pressure on consumers.

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

The proposal has revived opposition to the five per cent surcharge on chargeable fossil fuel products provided for under Nigeria’s tax framework. Its commencement remains subject to an order by the finance minister.

On June 16, 2026, the government had dismissed reports that it was introducing fresh taxes on petroleum products following recommendations in the International Monetary Fund’s Article IV consultation report. It said the value-added tax waiver on petroleum products remained in place and that no process to activate the fuel surcharge was then under consideration.

Comparing Nigeria 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 sequence 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 had a substantial influence on petrol prices, making it necessary to manage the transition while considering its impact on Nigerians. He said the petrol subsidy was completely removed in October 2023, when government support for both petrol prices and foreign exchange was no longer in place.

President Bola Tinubu had announced the end of the petrol subsidy during his inaugural address on May 29, 2023. Since then, fuel prices have remained a contentious issue, with many Nigerians complaining about the rising cost of transportation, electricity alternatives and other essential goods and services.

A tailor, Niyi Osundare, criticised the proposed tax, arguing that it would deepen the hardship faced by citizens already dealing with high living costs and the depreciation of the naira.

Osundare said businesses were struggling to remain operational because of unreliable electricity supply and their dependence on generators. With petrol reportedly selling for as much as ₦1,400 per litre, he argued that another levy could make it even harder for small businesses to cover their operating costs.

He questioned when the government’s promised improvement in incomes would materialise, saying many business owners were already operating at a loss and some had been forced to shut down.

Osundare insisted that Nigerians would resist the proposed tax, urging the government to reconsider the plan rather than impose further costs on consumers.

A lawyer and public affairs analyst, Kunle Onatade, also expressed doubts about the government’s assurances that revenue from the proposed levy would be used to improve infrastructure and protect consumers from future price shocks.

Onatade argued that the government had previously promised to channel savings from petrol subsidy removal into infrastructure development, questioning the extent to which Nigerians had benefited from those commitments.

He further criticised the administration’s borrowing, claiming that it had accumulated more debt in three years than the administration of former President Muhammadu Buhari did in eight years. He warned that the proposed tax could increase the financial pressure on households and businesses.

Business groups have also raised concerns about the potential effects on production costs, transportation expenses and consumer prices.

The Association of Small Business Owners of Nigeria urged the government to prioritise relief for businesses and households, warning that an additional fuel charge could worsen their financial difficulties.

Critics are calling on the Federal Government to focus on measures that would ease the effects of subsidy removal and rising living costs, arguing that any new fuel levy should be weighed against its potential impact on consumers and the wider economy.