FG to Impose 2-4% Green Tax on High-Engine Vehicles Starting July

The Nigerian government has introduced a new green tax that will impose a 2-4% levy on high-engine vehicles starting July 1, 2026. This move is part of a broader strategy to align the country’s tax system with environmental objectives while boosting revenue.

Overview of the Green Tax

The green tax, which was outlined in a government circular obtained by Reuters, targets vehicles based on their engine capacity. Vehicles with engine sizes between 2,000cc (2 liters) and 3,999cc will face a 2% surcharge, while vehicles with engines of 4,000cc and above will incur a 4% levy. 

However, vehicles with engine capacities below 2,000cc will be exempt from this new tax. Additionally, mass transit buses, electric vehicles, and locally manufactured cars are also excluded from the surcharge.

Government’s Fiscal Reform Strategy

This green tax initiative is part of a wider fiscal reform package approved by President Bola Ahmed Tinubu. The policy aims to promote environmentally friendly consumption while enhancing Nigeria’s revenue generation. 

Alongside the green tax, the government will implement changes to import tariffs, excise duties, and adopt the ECOWAS common tariff. Importers, manufacturers, and service providers have been granted a 90-day grace period to adjust before the tax fully takes effect.

Building on Previous Fiscal Reforms

The introduction of the green tax follows earlier efforts to reform Nigeria’s fiscal policies. In October 2023, the government proposed a green surcharge on imported vehicles to help boost revenue. 

Additionally, President Tinubu suspended a 5% excise duty on telecommunications and made adjustments to vehicle import taxes, which were aimed at reducing burdens on businesses.

These previous measures laid the groundwork for a more structured approach to fiscal policy, which is now being reflected in the 2026 policy framework. The green tax is one of several reforms designed to diversify Nigeria’s revenue sources and reduce the country’s dependency on oil exports.

Nigeria’s Long-Term Fiscal Reforms

The green tax is part of a long-term strategy by the Nigerian government to overhaul the country’s fiscal policy framework. In June 2025, President Tinubu signed four major tax reform laws to improve tax administration and enhance compliance. These reforms are aimed at increasing tax revenue, improving efficiency, and aligning Nigeria’s tax policies with regional standards.

In March 2026, the government introduced presumptive tax rules for Micro, Small, and Medium Enterprises (MSMEs), further broadening the tax base.

What This Means for Vehicle Owners and Importers

The green tax is expected to affect vehicle owners and importers, particularly those with high-engine vehicles. The 90-day grace period allows time for adjustments, but vehicle owners should begin preparing for the new surcharge, especially if they own cars with engine sizes of 2,000cc or more. 

The policy also incentivizes the use of electric vehicles and locally manufactured cars by excluding them from the tax.

FAQs About the New Green Tax

1. What is the new green tax in Nigeria?
The green tax is a 2-4% levy on vehicles based on their engine capacity. It aims to reduce harmful consumption while generating revenue for the government.

2. Who will be affected by this green tax?
Vehicles with engine capacities of 2,000cc to 3,999cc will face a 2% tax, while vehicles with engine sizes of 4,000cc and above will be taxed at 4%. Vehicles under 2,000cc, mass transit buses, electric vehicles, and locally manufactured cars will be exempt.

3. When does the new tax come into effect?
The green tax will be enforced starting from July 1, 2026. Importers and manufacturers will have a 90-day grace period to adjust to the new policy.

4. What is the government’s objective with this new tax?
The green tax is part of Nigeria’s broader fiscal reform efforts to align the country’s tax policies with environmental objectives while boosting government revenue.

5. Will the green tax apply to all vehicles in Nigeria?
No, only vehicles with engine capacities above 2,000cc will be affected by the tax. Electric vehicles, mass transit buses, and locally manufactured vehicles are exempt.