The Federal Government has rolled out a new environmental levy targeting vehicles with large engine capacities as part of the 2026 fiscal policy measures approved by President Bola Ahmed Tinubu.
Under the policy, effective July 1, 2026, vehicles with engines between 2,000cc and 3,999cc will attract a 2% green tax surcharge, while those with engines of 4,000cc and above will face a 4% levy. The measure is designed to discourage the use of high-emission vehicles and encourage a shift toward more environmentally friendly alternatives.
Key exemptions have been built into the framework. Vehicles with engines below 2,000cc will not be affected. Mass transit buses, electric vehicles, and locally manufactured vehicles are also exempt from the charge.
The government has provided a 90-day grace period starting from July 1 to allow importers and manufacturers sufficient time to adjust to the new requirements. The policy is being implemented alongside other fiscal reforms, including revised import tariffs and excise duties aligned with the ECOWAS Common External Tariff.
Officials say the green tax is part of a broader strategy to align Nigeria’s fiscal policy with environmental sustainability goals while generating additional revenue. It follows a series of tax reforms introduced by the Tinubu administration aimed at widening the tax base and reducing over-reliance on oil revenues.
Plans for a structured green tax were first hinted at in 2023. The current policy replaces earlier, broader levies — such as the suspended telecoms excise duty and represents a more targeted approach to promoting cleaner transportation options.
The introduction of the levy is expected to influence consumer choices in the automotive market and support the government’s long-term vision of reducing carbon emissions while fostering the growth of local manufacturing and electric vehicle adoption.
As the July 1 implementation date approaches, stakeholders in the automotive and import sectors are expected to begin preparations to ensure smooth compliance with the new fiscal measure.
