Manufacturers are urging the government to address energy, transport and infrastructure costs before introducing a fuel tax
Nigerian manufacturers and small-business representatives have urged the Federal Government to address infrastructure deficits, high energy costs and inflationary pressures before introducing a proposed fuel tax, warning that an additional levy could increase production and transportation costs.
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The industry representatives called for more reliable electricity, wider access to compressed natural gas (CNG), improved logistics, affordable financing and stronger domestic manufacturing capacity. They argued that introducing the tax before businesses have access to viable alternatives to petrol and diesel could push up consumer prices and weaken the competitiveness of locally produced goods.
Manufacturers Warn of Higher Production Costs
The concerns follow the Federal Government’s announcement that it would consider introducing the fuel tax when the economy stabilises and household incomes can accommodate the additional cost.
Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele has said revenue from the proposed levy would support road infrastructure and the development of a fuel reserve intended to moderate the effects of future price shocks. Implementation would require an order published in the Official Gazette.
Manufacturers argue that the timing of the measure is critical. Many businesses already contend with expensive electricity, fuel, transport, credit and imported inputs. An additional charge on petroleum products could increase the cost of operating generators, moving raw materials and distributing finished goods.
Businesses could pass some of these additional costs to consumers through higher prices, potentially adding to inflationary pressure. Companies that cannot raise prices sufficiently may instead experience lower profit margins, reduced output or weaker investment capacity.
The industry representatives therefore want the government to reduce the structural costs of doing business before introducing another charge on fuel.
Electricity and Transport Infrastructure Remain Priorities
The National President of the Association of Small Business Owners of Nigeria, Femi Egbesola, identified inadequate infrastructure, high energy costs, limited access to finance and logistics challenges as major constraints on businesses.
He called for improvements in electricity supply and transport infrastructure, arguing that lower operating costs would help businesses remain competitive without transferring additional expenses to consumers.
Reliable electricity remains particularly important for manufacturers that depend on generators to maintain production during grid outages. Where businesses must pay for both grid electricity and alternative power, energy costs can place pressure on working capital and limit investment in expansion.
Transport infrastructure also affects the cost of moving raw materials from ports and production centres to factories, and finished goods to distributors and retailers. Poor roads, delays and inefficient logistics can increase delivery costs and reduce the competitiveness of locally manufactured products.
For manufacturers, infrastructure improvements would therefore address costs that affect production and distribution across multiple sectors of the economy.
Manufacturers Call for Wider Access to CNG
Industry representatives also urged the government to accelerate the development of compressed natural gas infrastructure before using taxation to discourage reliance on petrol and diesel.
David Etim, Team Lead at Calabar and Gulf of Guinea Municipal and Trade Centre Limited by Guarantee, argued that alternative energy sources must be affordable and readily accessible before businesses can realistically switch away from conventional fuels.
CNG could offer an alternative for some transport operators and businesses, but wider adoption requires sufficient refuelling infrastructure, suitable vehicles and conversion facilities. Without these, the ability of manufacturers and small businesses to reduce their dependence on petrol and diesel will remain limited.
Egbesola similarly called for more investment in CNG infrastructure and support to reduce the cost of converting vehicles to use gas.
The representatives argued that expanding access to alternative energy would give businesses more options for managing operating costs. However, the economic benefits would depend on the cost, availability and reliability of the alternatives.
Domestic Steel and Agricultural Production Also Need Attention
Etim said Nigeria should strengthen its domestic industrial base, particularly steel production and agricultural equipment manufacturing, to reduce dependence on imported machinery and improve productivity.
He argued that a stronger steel industry could support the local production of agricultural machinery and equipment needed for mechanisation and irrigation. A more productive agricultural sector could, in turn, help address inefficiencies and supply-side constraints that contribute to food costs.
He also raised concerns about the cost of transporting live livestock over long distances, arguing that weaknesses in processing and distribution increase waste and inefficiency across the value chain.
These concerns reflect a wider argument from manufacturers: energy taxation cannot be considered in isolation from the infrastructure, industrial capacity and logistics systems that determine the cost of producing and distributing goods.
Strengthening local supply chains could reduce exposure to some imported inputs and transport inefficiencies, although the impact would depend on sustained investment and improvements in productivity.
SMEs Seek a More Predictable Business Environment
The proposed fuel tax has also renewed concerns about the broader cost of doing business in Nigeria.
Manufacturers and small businesses have repeatedly cited multiple taxes and levies, high financing costs, unreliable electricity and regulatory uncertainty as obstacles to expansion. An additional fuel charge could compound these pressures if existing constraints remain unresolved.
For small and medium-sized enterprises, which often have less financial capacity to absorb higher operating costs, the consequences could include tighter cash flow, reduced production and delayed investment.
Industry representatives want the government to improve the business environment, simplify regulatory requirements and make financing more accessible before introducing additional costs.
They have also questioned whether higher tax revenue would translate into tangible improvements for businesses and households. Transparent revenue allocation and visible infrastructure delivery would be important to demonstrating the value of any future levy.
Implications for Housing and Property Development
The concerns raised by manufacturers have direct relevance to Nigeria’s construction and property sectors, which depend heavily on energy, transport and building materials.
Cement, steel, roofing sheets, aluminium, tiles and other construction inputs require energy to manufacture and transport. Higher fuel and logistics costs can therefore increase the cost of supplying building materials to construction sites.
If a fuel tax raises the cost of transporting materials or operating construction equipment, developers and contractors could face additional project expenses. Depending on market conditions, these costs may be passed on to homebuyers and tenants, absorbed through lower margins or lead to delays in project delivery.
Housing affordability could also come under pressure if higher production and distribution costs feed into construction prices. However, the eventual effect would depend on the tax design, exemptions, fuel-price movements and the ability of businesses to improve efficiency or switch to alternative energy sources.
For property investors and developers, the wider issue is policy predictability. Clear implementation timelines and improvements in infrastructure could make it easier to assess project costs, budgets and investment returns.
The proposed levy has not yet taken effect based on the government’s stated implementation requirements, so its specific impact on construction costs remains uncertain.
Timing and Policy Design Remain Central
The debate centres on whether Nigeria should introduce the proposed fuel tax before businesses have adequate alternatives to conventional fuels and before infrastructure constraints have been substantially addressed.
The government has indicated that implementation would depend on economic conditions and households’ ability to absorb the additional cost. Manufacturers, meanwhile, are calling for electricity, transport, logistics and industrial reforms to reduce the burden on productive businesses.
Any eventual policy will need to consider its effect on production costs, consumer prices, government revenue and the transition to alternative energy sources.
For manufacturers, the priority is to ensure that fiscal measures do not undermine domestic production at a time when businesses are seeking to expand capacity and compete in local and international markets.
For Nigeria’s housing sector, the outcome matters because the cost of energy, materials and transport influences how much it costs to build homes and deliver infrastructure.
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