Fuel tax in hard times?

To go straight to the point: At a time when Nigerians are battling rising costs of living, deep economic distress and widespread hardship, the decision to implement a 5 per cent levy on both locally refined and imported petrol and diesel by January 1, 2026, is as harsh as it is ill-timed.

Introduced as part of the Federal Government’s updated tax law, this surcharge feels less like fiscal reform and more like a tone-deaf policy that ignores the daily realities of the people it affects most.

Since the removal of fuel subsidies on May 29, 2023, the day President Bola Tinubu assumed office, Nigerians have witnessed an unrelenting surge in inflation. That, paired with the sharp devaluation of the naira, has pushed the average household to the brink. The knock-on effects of these economic policies have been devastating, with prices of transportation and basic food items climbing steeply. Inflation has crept into every sector, healthcare, education, electricity, and telecommunications, leaving no essential untouched.

In this fragile environment, the prospect of an additional tax on fuel is akin to pouring salt on a gaping wound. The cost of petrol has soared from about N187 per litre before subsidy removal to roughly N900 per litre by the end of July 2025. At the same time, the naira has lost more than 60 per cent of its value against the US dollar. For many families, this has meant reduced meals, longer walks to work, children dropping out of school, and small businesses shutting down.

Imposing this new levy will only amplify these hardships. Fuel prices have a domino effect on nearly all sectors of the economy. From transportation costs to the price of garri in the local market, diesel and petrol are inextricably linked to affordability and access. With incomes stagnant and purchasing power diminishing, an additional financial burden, no matter how small it seems on paper, could be the tipping point for countless households.

The alarm bells have been rung by stakeholders across the spectrum. From fuel marketers and commercial drivers to smallholder farmers and civil society groups, the consensus is clear: This tax will drive up costs and deepen the suffering already endured by the majority. In a time where the Nigerian economy remains fragile and consumer confidence low, this policy appears out of touch with social and economic realities.

The Federal Government insists that the new fuel tax will improve non-oil revenue generation and promote long-term fiscal balance. But this justification falls flat when weighed against the lived experiences of Nigerians. It raises the fundamental question: should fiscal consolidation come at the expense of human welfare? It is difficult to reconcile the government’s optimistic economic projections with the deteriorating quality of life faced by millions.

There is something profoundly wrong when a country that claims to be saving $600 million monthly from fuel subsidy removal and reporting a 40 per cent rise in state allocations within a year still seeks to extract more from its already overburdened population. If these savings and increases are real and being properly managed, then why are citizens being asked to sacrifice even more? Is the goal to reform, or to suffocate?

While the government eyes nearly N800 billion in revenue from this new policy, it must ask itself whether this financial gain is worth the social cost. True sustainability is not only about financial solvency; it is about balancing economic growth with social equity and environmental responsibility. Punitive taxation on essential commodities is not sustainable policy, it is simply shortsighted.

Tax reform in Nigeria must be grounded in justice and fairness. The recent push to broaden the tax base, increase compliance, and plug revenue leaks is laudable. However, placing additional levies on a product as vital as fuel contradicts the very principle of equitable reform. Taxes must be progressive and sensitive to socioeconomic conditions, especially in a country where more than 60 per cent of the population already lives below the poverty line.

An administration that campaigned under the banner of “Renewed Hope” risks eroding public trust with this kind of decision. If hope means anything, it should reflect in policies that ease suffering, not exacerbate it. Leadership that genuinely seeks to uplift its people must listen, not lecture; empathise, not exploit.

Voices like that of Akintade Abiodun, National Chairman of the Joint Drivers Welfare Association, who compared the policy to treating Nigerians like “lab rats,” should not be dismissed as emotional. They reflect the despair of real people who carry the weight of poor policy decisions daily. Leaders must listen more to such voices, not just economic advisors or foreign consultants.

If the Federal Government is truly interested in generating more revenue from the petroleum sector, then the solutions are well documented. It must take transparency seriously, especially within the operations of the Nigerian National Petroleum Company (NNPC). There is a dire need for comprehensive reforms, including the privatization or revitalization of the nation’s comatose refineries, investments in gas infrastructure, and the promotion of digital tracking and price transparency in downstream operations.

These efforts, combined with stricter oversight and elimination of corruption in the oil sector, will go a much longer way in boosting government earnings than taxing the poor. The real work is in fixing the structural inefficiencies, not creating additional burdens on those already bearing the brunt of failed systems.

At a time when citizens are reeling from inflation, job losses, and economic dislocation, the government must tread carefully. This fuel surcharge does not reflect compassion, nor does it reflect sustainable thinking. Revenue collection should never be a zero-sum game between the state and its people. There must be a human face to fiscal strategy, especially in a country so vulnerable to economic shocks.

Public finance, at its core, should serve the people. Any tax policy that widens inequality, deepens poverty, or erodes the social fabric cannot be justified regardless of how many billions it promises to rake in. It is high time Nigerian leadership stopped treating hardship as a policy tool.

Until the economy stabilises, purchasing power improves, and inflation subsides, this planned fuel surcharge must be shelved. The government has a responsibility to protect, not punish, its citizens.

Sustainability in public finance demands empathy, equity, and responsibility. Anything less is not reform.