The Nigerian government has approved a 15% ad-valorem import duty on petrol and diesel imports, a move aimed at supporting domestic refining capacity but one that analysts warn could trigger a new wave of inflation for consumers.
What is the policy change?
On 21 October 2025, President Bola Ahmed Tinubu signed off on a memorandum instituting the 15% duty on the cost, insurance and freight (CIF) value of imported petrol (Premium Motor Spirit, PMS) and diesel.
The stated objective: to protect large domestic investments—most notably the Dangote Refinery in Lagos—from being undercut by cheaper imported fuel, and to accelerate Nigeria’s push toward fuel self-sufficiency.
At current CIF import parity, the duty is estimated to add roughly ₦99 per litre to the landed cost of imported petrol.
Why the government says it is needed
Nigeria, Africa’s largest oil producer by output, paradoxically has long been reliant on importing refined petrol and diesel. Domestic refineries have struggled to meet full demand due to feedstock, logistics and currency issues. The government argues that cheap fuel imports—often priced below local cost‐recovery levels—undermine domestic refining and weaken the downstream sector.
Thus, the import duty is framed as a corrective fiscal measure:
- Protect local refinery investments
- Level the playing field between imported and locally refined products
- Strengthen the domestic petroleum value chain
- Generate non‐oil revenue as part of wider fiscal reforms ahead of planned tax changes in 2026.
The inflation risk and consumer impact
However, the timing and nature of the duty raise concerns. Nigeria is already grappling with high inflation, elevated transport and energy costs, and a weakened naira. Introducing a new cost burden on petrol threatens to ripple across many sectors.
Key issues:
- Fuel price increases: The duty may raise the pump price of petrol from around ₦950 per litre to as high as ₦1,163.75 per litre, according to some estimates.
- Transport & logistics costs up: Higher fuel costs raise the cost of moving goods, commuting, public transport, and agricultural operations.
- General inflation: As fuel is a major input across the economy, rising petrol/diesel costs can drive up prices of food, services and manufactured goods.
- Consumer hardship: With many Nigerians already under cost‐of‐living pressures, the duty may exacerbate poverty and reduce disposable income.
One industry stakeholder put it bluntly: “Whatever tax you place on fuel goes straight back to the people on the streets.”
Possible structural gains—but only in the long term
The government and supporters argue the measure could yield important long-term benefits:
- Boosting domestic refining capacity and reducing import dependency.
- Strengthening the naira by reducing foreign currency exposure on imported fuel.
- Fostering an energy value chain that creates jobs, downstream investment, and more stable supply.
For example, the Dangote Refinery reportedly aims to ramp up production and reduce the volume of imported petrol.
But analysts emphasise that such gains are medium to long term. In the short run, the transitional costs could be heavy unless accompanied by strong mitigation measures (subsidies, public transport investment, targeted relief). Economic experts caution that the policy is a “strategic inflection point” but risks becoming a burden if poorly managed.
Why the timing is controversial
Several contextual factors raise caution:
- Inflation in Nigeria is already high; adding fuel cost pressures now may reduce the resilience of households and businesses.
- The subsidy removal from earlier years and currency devaluation have already eroded purchasing power.
- Protectionist aspects of the policy (favoring one large refinery) may undermine competition and efficiency. Critics allege that the import duty disproportionately benefits Dangote over independent marketers.
- Implementation risks: If domestic refineries cannot quickly ramp up to meet demand, reliance on imports persists and the higher costs are simply passed to consumers.
Wider economic and social implications
1. Transport and mobility
Fuel is a key input for transport. Higher fuel prices will increase commuting costs for workers, reduce margins for transport operators, and likely raise fares. In turn, this can reduce disposable income and productivity.
2. Agriculture & food prices
Diesel powers farm equipment, irrigation, haulage of produce to markets. Rising fuel costs will push up food production and transport costs—leading to higher consumer food prices.
3. Manufacturing & services
Factories and service firms dependent on energy and transport may face higher operating costs. Some may pass increases to consumers, cut output, or lay off workers—affecting overall growth and employment.
4. Poverty & inequality
Poorer households spend a higher percentage of income on fuel, food and transport. The duty thus risks widening inequality and reducing the standard of living for the most vulnerable. Politically, it may heighten unrest or demands for relief.
5. Currency & fiscal effects
If the duty reduces fuel imports, it can relieve foreign currency demand and support the naira. But if imports continue despite the duty, the foreign exchange pressure remains. Moreover the duty seeks to raise revenue—but if fuel consumption drops or market shifts occur, the fiscal assumptions may not hold.
What needs to be watched
- Pump price movement: Will importers and marketers fully pass the duty cost to consumers? Will prices rise by the full estimated ₦99 per litre or more?
- Supply reliability: Will domestic refineries ramp up to supply, preventing shortages or black-market fuel.
- Inflation data: Will fuel price increases feed into consumer price index (CPI) numbers in subsequent months?
- Government relief measures: Are there targeted subsidies, public transport investments, tax reliefs, or other cushion mechanisms for households?
- Market competition: Will the downstream market remain competitive or will a dominant refinery capture market share and dictate prices?
- Social response: Will higher fuel costs trigger protests, transport strikes or political backlash?
- Foreign-exchange impacts: Will the duty ease currency pressure or will increased internal cost pressures worsen macro stability?
Conclusion
Nigeria’s decision to impose a 15% import duty on petrol and diesel marks a bold shift in energy and fiscal policy. While the move aims to protect domestic refining, reduce reliance on imports, and reinforce the petroleum value chain, it comes at a time of heightened economic vulnerability for many Nigerians.
In the short term, the risk is clear: higher fuel prices, rising inflation, increased cost of living, and potential social strain. Without well-structured mitigation and a clear timeline for benefits, the policy could heighten hardship rather than ease it.
In the long term, success will depend on whether domestic refining capacity, infrastructure, market regulation and consumer protections rise to meet the change. If they do, the policy could enhance energy security and economic value addition. But if they don’t, the duty may simply become another driver of inflation—and a political liability for the government.
