New regulations make levy collection mandatory at wholesale points, with penalties and licence suspension for defaulters
The Federal Government has stepped up regulatory oversight in the downstream petroleum sector with the full enforcement of a 0.5 per cent levy on the wholesale price of petroleum products and natural gas, following the issuance of the Midstream and Downstream Petroleum Operations Regulations, 2025.
Under the new regulations, suppliers of petroleum products are now required to collect and remit the levy from their wholesale customers at wholesale points, with compliance directly tied to licensing and continued operation in the sector.
The levy is anchored in Section 47 of the Petroleum Industry Act, which mandates the Nigerian Midstream and Downstream Petroleum Regulatory Authority to maintain an Authority Fund into which revenues accruing to the regulator are paid. One of the identified sources of the fund is “0.5 per cent of the wholesale price of petroleum products sold in Nigeria, which shall be collected from wholesale customers.”
The enforcement follows months of debate between fuel traders and the NMDPRA over responsibility for collecting the levy. In December 2024, industry players and the regulator publicly disagreed on whether suppliers or the authority itself should serve as the collecting agent.
While the NMDPRA maintained that suppliers were responsible for collection and remittance, operators argued that the law did not designate them as levy collectors and warned that the requirement would impose an additional operational burden.
At a sensitisation meeting in Lagos, stakeholders under the Oil Producers Trade Section urged the regulator to either assume responsibility for collection or place the obligation directly on wholesale customers. They also questioned whether the levy should be treated like Value Added Tax and charged separately.
The regulator countered that the Petroleum Industry Act deliberately used the phrase “0.5 per cent of” rather than “0.5 per cent on,” stressing that the levy should be deducted as a proportion of the wholesale price rather than added as a separate charge.
To remove ambiguity, the NMDPRA stated in the new operations regulations that the levy would be collected by suppliers from their wholesale customers for both imported and locally refined petroleum products sold in Nigeria.
“There shall be paid to the Authority Fund 0.5 per cent of the wholesale price of petroleum products sold in Nigeria, which shall be collected from wholesale customers by a supplier at wholesale points for imported petroleum products sold in Nigeria and petroleum products produced, processed, refined, and sold in Nigeria,” the regulator stated.
Beyond the Authority Fund, operators are also required to pay an additional 0.5 per cent levy on the wholesale price of petroleum products and natural gas into the Midstream and Downstream Gas Infrastructure Fund.
According to the regulations, “There shall be paid to the Midstream and Downstream Gas Infrastructure Fund 0.5 per cent of the wholesale price of petroleum products and natural gas sold in Nigeria, which shall be collected from wholesale customers by a supplier at wholesale points for imported petroleum products sold in Nigeria and natural gas sold in Nigeria and petroleum products produced, processed, refined and sold in Nigeria.”
The NMDPRA clarified that both levies form part of the wholesale price of petroleum products and natural gas sold in the country.
It stated that the levy due to the Authority Fund becomes payable immediately upon sale and must be remitted by the supplier not later than the 21st day following the month of sale, or as otherwise directed. The levy payable to the Midstream and Downstream Gas Infrastructure Fund is also due within 21 days of sale and must be remitted within the same timeframe.
The regulations further require that the levies be reflected in purchase agreements, invoices, receipts, and any other documentation evidencing the sale of petroleum products or natural gas between suppliers and wholesale customers.
Suppliers are also mandated to submit monthly reports to the authority, no later than the 30th day of each month. The reports must include volumes sold, prices, names of wholesale customers, and copies of all relevant transaction documents.
Upon confirmation of payment, the NMDPRA is to issue a receipt to the supplier, who must then provide a copy to the wholesale customer. The authority will also monitor wholesale points to ensure the issuance of certificates of quantity and quality, as well as reconciliation of products sold.
The regulator warned that failure to comply would attract sanctions. Suppliers who fail to remit the levies as prescribed will, in addition to the unpaid amount, be liable to an administrative penalty equal to 10 per cent of the outstanding sum for each month or part thereof after the due date.
The NMDPRA added that it may suspend the licence of any defaulting supplier or halt operations at facilities where petroleum products or natural gas are processed, discharged, or stored until all outstanding levies and penalties are fully paid.
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