How lower import duties and new Green Tax will hit car prices, buyers and dealers in Nigeria

Nigeria's latest fiscal reforms are set to reshape the automobile market, offering relief for some car buyers while increasing costs for others. Under the Federal Government's 2026 Fiscal Policy Measures, which took effect on July 1, import duties on new and used vehicles have been significantly reduced, while a new Green Tax has been introduced for larger, high-emission vehicles.

The policy is expected to influence the prices Nigerians pay for imported vehicles, particularly luxury SUVs and high-capacity engine models.

What is the Green Tax and who pays it?

The Green Tax is an environmental levy imposed on products or activities that contribute to pollution. Its objective is simple: make environmentally harmful choices more expensive while encouraging cleaner alternatives. Nigeria's new policy is tied to its broader climate agenda, including the Nigeria Energy Transition Plan, launched in 2022, which aims to achieve net-zero carbon emissions by 2060. It also aligns with the Climate Change Act 2021 and the country's commitments under the Paris Agreement to reduce greenhouse gas emissions, according to a report by BusinessDay.

With the move, Nigeria joins several countries using tax policies to discourage pollution. African nations such as South Africa, Ghana and Kenya have already introduced similar environmental tax measures, while Morocco, Rwanda and Egypt are developing comparable frameworks.

The Green Tax applies only to imported vehicles with larger engine capacities. Vehicles with engines between 2,000cc and 3,999cc will attract a 2 per cent environmental levy, while those with engines of 4,000cc and above will pay 4 per cent.

Which vehicles are exempt from the new levy?

According to the Nigeria Customs Service, electric vehicles (EVs), mass transit buses and locally manufactured vehicles will not be subject to the Green Tax, a move designed to encourage cleaner mobility and local production.

How much have import duties dropped?

To offset the impact of the new environmental levy, the government has slashed import levies on vehicles. Import duties on brand-new vehicles have been reduced from 20 per cent to 10 per cent, while duties on used (tokunbo) vehicles have dropped from 15 per cent to five per cent. The reduction is expected to ease import costs for many dealers, although the final price consumers pay will still depend on several other factors.

Which cars will cost more and which will cost less?

Buyers of larger-engine vehicles are likely to feel the biggest impact of the Green Tax. Models that may attract the new levy include full-size SUVs and luxury vehicles such as certain variants of the Toyota Land Cruiser, Volvo XC90, Mercedes-Benz GLE, heavy-duty pickup trucks, the Porsche 911 and the Honda Civic Type R, according to a report by BusinessDay. Smaller-engine vehicles, electric cars and locally assembled vehicles are expected to benefit the most from the policy.

While lower import duties may reduce costs for some vehicles, industry experts say Nigerians should not expect an across-the-board drop in prices. Automotive consultant Ifechukwu Obodoechi noted that exchange rates, freight costs, customs clearing charges, dealer margins and the new Green Tax will continue to influence vehicle prices. He said buyers should conduct proper market research and consider the total cost of ownership instead of focusing solely on the headline reduction in import duties.

For importers, other charges also remain in place, including Customs duties, the National Automotive Council levy, Value Added Tax and applicable regional levies.

What this means for the naira and Nigerian car buyers

The bottom line is that while many smaller-engine and cleaner vehicles could become more affordable, buyers of luxury and high-capacity models should prepare to pay more under Nigeria's new Green Tax regime. The government's decision to reduce import duties is a move set to ease the financial burden on Nigerians grappling with skyrocketing car prices, but questions loom over whether it will effectively deter importers from diverting cargo to neighbouring ports amid ongoing fiscal challenges.