…Stakeholders kick, fear inflation, worsening poverty
President Bola Ahmed Tinubu’s administration is proposing a new tariff regime that could see motorists and industries pay an estimated ₦4.8 trillion yearly in fresh taxes on petrol and diesel.
Coming amid worsening poverty, the new tax regime and the government’s inability to cushion the impact of subsidy removal, the 15 percent import duty, alongside the 7.5 per cent Value Added Tax (VAT) attached to tariffs, is expected to raise fuel prices by at least 22.5 percent, pushing the pump price of petrol from the current average of ₦950 per litre to around ₦1,163.75 per litre.
The 15% duty is coming at a time when the government has already legislated a five per cent surcharge on refined petroleum products contained in the Nigeria Tax Administration Act, which is meant to take effect from 2026.
Currently, Nigeria consumes about 48 million litres of petrol and 14 million litres of diesel daily; roughly 62 million litres in total. Applying the proposed tax structure translates to an additional ₦13.2 billion per day, or ₦4.8 trillion per year, which would be passed directly to consumers.
The Government insists the tariff is not revenue-driven but corrective, designed to protect domestic refineries such as the ÆŠangote Refinery and the rehabilitated NNPC facilities. However, analysts and stakeholders warn that the policy could stoke inflation, deepen poverty, and create opportunities for profiteering in a sector already plagued by weak regulation and high volatility.
A leaked policy memorandum sent to the President by senior government officials described the proposal as a ‘measured import tariff on Premium Motor Spirit (PMS) and Diesel’ aimed at ‘reinforcing national energy security, safeguarding local refining capacity, and stabilising the downstream market’.
Recall that President Tinubu had in July 2024 approved the settlement of crude oil dedicated to domestic consumption in Naira to strengthen local refining capacity and reduce exchange rate exposure.
According to the memorandum, price instability persists because import parity, rather than cost recovery, remains the dominant benchmark in the market. Imported fuel often sells below the recovery point of domestic refiners, especially during currency fluctuations.
“Left unchecked, these risks undermine our nascent refining sector at the very point of recovery”, the document stated. The Government’s stated objective is to prevent duty-free imports from undercutting local refineries while “maintaining healthy competition and protecting consumers”.
Under the proposed arrangement, a 15 percent ad valorem duty will be applied on the cost, insurance, and freight (CIF) value of imported petrol and diesel. At current import costs, this represents about ₦99.72 per litre, which the government claims would bring imported products closer to local cost recovery levels. The tariff proceeds will be paid into a Federal Government revenue account managed by the Nigeria Revenue Service, with verification by the Nigerian Midstream and Downstream Petroleum Regulatory Authority, (NMDPRA).
Ironically, a September 2025 presentation by S&P Global revealed that locally refined petrol already costs more than imported fuel shipped to West African markets.
The report showed that petrol sold in Lomé, Togo, for just under ₦800 per litre, while marketers were paying ₦820 per litre to procure the same product from the Ɗangote Refinery in Lagos. When freight costs from Lomé to Lagos were added, the landed price rose to slightly above ₦840 per litre, still cheaper than the Ɗangote ex-depot price.
Lomé serves as West Africa’s leading ship-to-ship (STS) hub, where refined products from Europe, the U.S. Gulf, and the Middle East are transferred to regional buyers. The ‘Gasoline STS Lomé’ price already includes ocean freight, insurance, and STS transfer premiums. The fact that locally refined products in Lagos are more expensive than imports delivered to Lomé raises questions about refinery cost structures, logistics efficiency, and market competitiveness.
Given that imported fuel attracts a 15 percent duty, the Ɗangote Refinery could legally peg its retail price to the foreign benchmark plus the tariff, ensuring fatter profit margins. This pricing model mirrors the so-called ‘Follow Our Own Dollar (F.O.O.D.)’ principle, whereby local producers align prices with international benchmarks rather than domestic production realities.
Economists warn that such dynamics could undermine the expected benefits of local refining, leaving consumers exposed to international market fluctuations. Analysts have pointed out that for households, this means higher commuting and utility expenses; for manufacturers, it could translate to slimmer profit margins or increased prices for goods and services.
Industry insiders are equally sceptical, as a senior downstream operator who requested anonymity said the new tariff could open doors for profiteering and regulatory capture. “The government may not be able to differentiate between domestic and imported supply, similar to past experiences whereby forex allocations were exploited”, the source said.
Supporters of the tariff argue that regional comparisons still favour Nigeria. Even with the proposed 15 percent duty, the Federal Government maintains that Lagos pump prices would remain around ₦964.72 per litre ($0.62), well below regional averages such as Senegal ($1.76), Côte d’Ivoire ($1.52), and Ghana ($1.37).
However, local economists note that this comparison ignores income disparities. In a country where the minimum wage is ₦70,000, an additional ₦213 on every litre of petrol is far from sustainable.
The Ɗangote Refinery, touted as Africa’s largest, has also struggled to ramp-up production to full capacity. Persistent operational delays, feedstock challenges, and currency instability have limited its output, casting doubt on its immediate ability to meet domestic demand.
The timing of the policy, coming just months after fuel subsidy removal and amid soaring inflation, stakeholders said, has stirred fresh debate about the government’s economic priorities.
Insisting that the policy may be sound on paper but in practice risks becoming another burden on Nigerians already stretched by high food, rent, and transport costs, the stakeholders warned the government to reverse its stance.
