• Nigeria introduces 5% levy on gasoline and diesel sales for road upkeep.

• Government needs 880 bln nairas yearly but budget covers only 20% of needs.

• New tax expected to raise freight, food and industrial costs, fueling inflation.

The Nigerian government has introduced a 5% surcharge on gasoline and diesel sales to finance road maintenance, according to local media reports. The measure, signed into law by President Bola Tinubu in late June, is aimed at filling infrastructure funding gaps but risks further increasing transport costs in a country where fuel prices have already tripled since the removal of subsidies in 2023.

Severe funding shortfall

Public Works Minister Bello Goronyo said the road levy had been planned since 2007 but was never enforced, leaving the sector underfunded. He estimated Nigeria needs about 880 billion nairas ($578 million) annually to maintain its road network, while current allocations meet barely 20% of the requirement. The new tax is being presented as a way to close that chronic gap.

Impact on businesses and consumers

Transporters, heavily reliant on diesel, face higher operating costs and are expected to raise fares. Fuel distributors will pass on the surcharge, driving up the price of food, manufactured goods, and industrial inputs. Producers, especially in agro-industry, could see already thin margins shrink further amid a volatile naira.

With more than 90% of domestic trade carried out by road, the extra costs will weigh directly on freight. Industries dependent on steady supply chains — from steel and cement to agriculture and consumer goods — will face higher logistics expenses. Traders may cut back on production or increase prices, worsening inflation pressures already straining households.

Regional competitiveness at risk

Analysts warn the tax could also hit cross-border trade. Routes linking Lagos with Cotonou, Accra, and Niamey may become more expensive, undermining Nigeria’s position in the African Continental Free Trade Area (AfCFTA), where logistics competitiveness is key.

Higher costs will also squeeze Nigerian exporters, making their goods less competitive against products from neighboring markets or other African countries with stronger logistics networks.