The government of Nigeria has announced the introduction of a green tax surcharge on high-engine vehicles, imposing a levy of between 2% and 4% as part of its 2026 fiscal policy measures scheduled to take effect from July 1, 2026.
According to a government circular obtained by Reuters, the policy forms part of broader fiscal reforms approved by Bola Ahmed Tinubu. The initiative is designed to strengthen government revenue while promoting environmentally responsible consumption.
How the new green tax will work
Under the new framework, the tax will be applied based on vehicle engine capacity:
- Vehicles with engines between 2,000cc (2.0-litre) and 3,999cc will attract a 2% levy.
- Vehicles with engines of 4,000cc and above will face a 4% tax.
However, certain categories of vehicles will be exempt from the levy. These include:
- Vehicles with engine capacity below 2,000cc
- Mass transit buses
- Electric vehicles
- Locally manufactured vehicles
The policy is expected to encourage the use of cleaner and more energy-efficient vehicles while discouraging reliance on larger, more fuel-intensive automobiles.
Part of broader fiscal reforms
The green tax forms part of a wider 2026 fiscal policy package, which also includes:
- Revised import tariffs
- Adjustments to excise duties
- Adoption of the Economic Community of West African States (ECOWAS) Common External Tariff
To ease the transition, the government has provided a 90-day grace period before full enforcement, allowing importers, manufacturers, and service providers time to adjust to the new rules.
Background to the policy
The introduction of the green tax builds on earlier efforts by the Nigerian government to expand the tax base and introduce environmentally conscious fiscal policies.
In October 2023, authorities first announced plans to introduce a green surcharge on imported vehicles as part of strategies aimed at boosting government revenue.
During the same period, President Tinubu also suspended certain taxes—including the 5% excise duty on telecommunications services and the import adjustment levy on some vehicles—in an effort to reduce the burden on businesses and address concerns about excessive taxation.
These earlier policy moves helped lay the foundation for the more structured fiscal reforms introduced in the 2026 policy framework.
Broader tax reforms underway
The green tax is part of a broader overhaul of Nigeria’s tax system aimed at improving efficiency and reducing reliance on oil revenue.
In June 2025, President Tinubu signed four major tax reform laws intended to strengthen tax administration, improve compliance, and increase government revenue mobilisation.
More recently, in March 2026, the Federal Government introduced presumptive tax rules targeting Micro, Small, and Medium Enterprises (MSMEs) to expand the country’s tax net.
The latest green tax measure signals the government’s push toward modernising Nigeria’s fiscal system while integrating environmental considerations into taxation policies.
