In a major policy shift aimed at tackling Nigeria’s worsening cost-of-living crisis, the Federal Government has begun a large-scale cut in import duties on essential goods, including food staples, passenger vehicles, mass transit buses, electric vehicles and manufacturing machinery.
The new rates, which took effect from this July, were said to be contained in the 2026 Fiscal Policy Measures approved by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele.
The policy is viewed as one of the most significant overhauls of Nigeria’s tariff regime in recent years, with 127 tariff lines targeted with reduced rates across household consumption, transport, manufacturing and industrial activity.
The decision by the government comes at a critical time for the economy as many Nigerians continue to grapple with high food prices, transport costs and weak purchasing power. While inflation had eased from its peak of around 33 per cent in late 2024, concerns have lingered about renewed price pressures.
S&P Global recently raised its 2026 inflation forecast for Nigeria to 16.9 per cent, saying global energy shocks were exerting pressure and had contributed to a sharp rise in petrol prices.
Duty on Rice, Sugar, Palm Oil Slashed
A critical aspect of the new fiscal measures targets food products that are commonly used in Nigerian households.
The new rates cut the duty on bulk rice to 47.5 per cent from 70 per cent and broken rice now is taxed at 30 per cent.
Duties on raw cane sugar have been cut to between 55 and 57.5 per cent and crude palm oil now attracts 28.75 per cent duty against 35 per cent.
The cuts are designed to lower the cost of staple foods and costs for commercial food producers.
Rice remains a key food item in many households and the cut in duty is likely to ease pressure, if the gains are passed on to consumers.
But analysts warned that lower duties alone might not necessarily translate into cheaper food, especially with continuing exchange rate pressures, high fuel prices, logistics costs and port charges.
Relief for Vehicles, EVs, Buses
The new tariff regime also has a major focus on the transport sector.
The duty on passenger vehicles has been brought down from 70 percent to 40 percent, a move that is expected to reduce the landed cost of imported cars.
Mass transit buses and electric vehicles were also fully exempted from import duties to lower transport costs and promote the use of cleaner energy, the government said.
Machinery for manufacturing now attracts zero per cent duty as part of a move to revive industry, cut production costs and promote investment in local manufacturing.
The policy could help transport operators reliant on imported buses, trucks, minibuses and light commercial vehicles for interstate haulage and urban transport services, stakeholders said.
Many operators run old fleets, which are costly to maintain, fuel inefficient and break down frequently. The large number of unserviceable vehicles on Nigerian roads has been blamed on the high cost of vehicle replacement.
Industry players expect that the landed cost of vehicles will gradually fall as import levies are reduced. This could make it cheaper for transport companies and independent operators to renew their fleets.
Potential Effects on Food Prices
The policy is also understood to be of help to the logistics sector, especially in cases where agricultural produce is transported over long distances by trucks.
Transport costs add a significant amount to the prices of food in Nigerian markets, especially for staple crops such as sorghum, millet, maize, yam and cassava, which are transported from rural production centres in the North to urban markets in the South.
Stakeholders believe any savings on the cost of haulage may ultimately be passed on to the final retail price of food.
But the effect is likely to be more of a drip than a bang.
Lower vehicle acquisition costs could also improve efficiency in the transport sector by allowing operators to invest in more fuel efficient and reliable vehicles, reduce breakdowns and improve delivery turnaround time.
But these potential gains may be undermined by other structural pressures in the economy.
The price of crude oil has fallen to below $73 in the international market, but the price of fuel remains above N1,000 per litre. The exchange rate is still fluctuating between N1,400 and N1,500 to the dollar.
These factors mean the reduction in import levies could ease the pace of increases in transport costs, but they will not immediately bring down fares or food prices.
A public commentator, Kehinde Aluko, told the Guardian the policy raised questions about consistency in government economic management.
He said that for years, the Federal Government encouraged local production, especially in agriculture, by using high tariffs to protect Nigerian farmers from cheaper imports.
Aluko warned that a fast reduction of tariffs on rice and other commodities could hurt investor confidence and hurt local farmers who had made investment decisions based on protectionist policies.
‘The government is not only cutting revenue, it is transferring tax burden from import to consumption,’ he said.
“The government’s plan is not simply about reducing revenues, it’s about a fundamental shift in the tax burden from imports to consumption. We will also be introducing new excise duties on non-alcoholic beverages, alcoholic drinks and tobacco products from 1 July 2026 and a ‘green tax’ surcharge on higher-engine vehicles.
“Thus, relief from lower import duties could be offset by higher prices of everyday consumables and luxury items. For the average Nigerian, the near future is a sort of tug of war. “On the one hand, it may become cheaper to buy a car or industrial machinery, but the daily cost of a bottle of soda or a pack of cigarettes will almost certainly go up,” he said.
Aluko, himself a telecom expert, said the real test of the policy would be whether the relief at the ports would outweigh new costs at the checkout counter.
He said the next few months will be a critical test for the economy and the resilience of the Nigerian people as the government changes its focus.
Importers fear logjams
Importers, freight forwarders and car dealers said tariff reduction alone may not bring about the desired economic outcome.
The volatility of the exchange rate, multiple port charges, logistics costs, terminal handling fees and delays in cargo clearance were among the main factors influencing the final cost of imported goods, they said.
They argue that businesses and ordinary Nigerians will not fully enjoy the benefits unless these bottlenecks and tariff cuts are tackled.
They noted that tariff adjustments were carried out on selected products during the administration of former President Muhammadu Buhari to boost local production and respond to economic realities.
In 2021, the tariff on imported vehicles was lowered from 35 percent to 10 percent.
However, stakeholders said the measure yielded mixed results. While some importers experienced lower duties on some items, these gains were largely eroded by foreign exchange volatility, increasing shipping costs, inflation and port related charges.
Thus the expected drop in consumer prices was not fully realised.
Manager of Client Services at Inspired Cars, Iwayeye Olatunji, described the reduction in import duty on vehicles and spare parts as a welcome development but stressed that it might not result in significant reductions in the prices of vehicles.
High exchange rates and other charges on imports could blunt the new policy, he said.
Olatunji said previous reduction of duty under the Buhari administration had little impact on the prices of vehicles as only about 10 per cent difference was recorded.
But the new tariff looks good on paper, but consumers might not see much price relief because several other costs connected with importing cars are still the same, he said.
“Honestly, before, it was mostly paper. Fine, the duty was reduced but did it really have any direct impact on the market? That’s another problem. “When the duty is cut, but other supporting fees are still there, the total price doesn’t really change,” he said.
The National President of the Africa Association of Professional Freight Forwarders and Logistics of Nigeria, Frank Ogunojemite, said the policy would not be judged by the announcement but by its practical effect.
He said the key measures would be the impact on the cost of doing business, the prices of imported goods and the cost of living in general.
\”The difference is that today tariff reduction alone does not produce the desired economic result. The final cost of imported goods is still determined by volatility of exchange rates, multiple port charges, logistics costs, terminal handling charges and delays in cargo clearance. “But the benefits of tariff reductions may not be fully enjoyed by businesses or the average Nigerian unless these bottlenecks are tackled at the same time,” he added.
Ogunojemite urged the Federal Government to closely monitor the market responses to ensure that the intended benefits get to consumers and are not swallowed up by inefficiencies in the supply chain.
“Nigerians want to see the benefits beyond policy documents. Lower tariffs should ultimately mean cheaper landing costs, more import activity, better business confidence and cheaper products for consumers,” he said.
Importer sees policy gap.
Clinton Ikechukwu Okoro, importer and Chief Executive Officer of Globe Joy Investment Nigeria Limited, said the new duty rates had commenced at the ports.
He, however, said the process indicated a disconnect between policymakers and operators in the automotive import sector.
According to Okoro, the earlier reduction in vehicle duties under the Buhari administration did not translate to a significant drop in the prices of vehicles or a boost in imports.
He said that the prices of vehicles have continued to rise sharply, making ownership of a car more and more difficult for many Nigerians.
He said that despite earlier duty cuts, imports of used vehicles have fallen sharply in the last few years.
Okoro said he was cautiously optimistic the latest policy could encourage vehicle imports if the reductions are meaningful after a detailed review.
Stakeholders in the automotive sector had mixed reactions to the new tariff regime especially on importation of vehicles.
Some warned that the policy could hurt local vehicle manufacturing, but others argued that it would increase affordability and the availability of vehicles in the market.
Luqman Mamudu, the Managing Partner of Transtech Industrial Consulting, said the tariff difference on passenger vehicles was not enough to give meaningful protection to local manufacturers.
Effective tariff protection was about 70 per cent but the 40 per cent differential on passenger cars was not enough to encourage serious investment in vehicle manufacturing, he said.
Mamudu said that Nigeria’s automotive industry still required deliberate protection by the government within the limits allowed under the Economic Community of West African States Common External Tariff.
“There is need for deliberate protection of the industry through full use of the Import Adjustment Tax (IAT) window and applicable levies. Then those measures can be gradually phased out as the industry evolves,” he said.
Many foreign vehicle makers get large government subsidies in their countries, making it hard for Nigerian assemblers to compete solely on tariff protection, he said.
He urged the Federal Government to complement tariff measures with local concessions and incentives to attract global automakers to set up production plants in Nigeria.
“The auto industry has a multiplier effect on the total economic development. “So too much is no support by government,” Mamudu said.
Zero Tax On Commercial Vehicles Slammed
Mamudu also criticised the Federal Government’s decision to place a zero per cent import tariff on commercial vehicles, arguing that it is too much and could harm Nigeria’s budding commercial vehicle assembly industry.
The policy will not reduce car prices much, nor help local production, he said.
“Local manufacturers have made headway in growing local content and commercial vehicle assembly was one of the success stories of the National Automotive Industry Development Plan,” he said.
Commercial vehicle plants are easier to build and increase local content. “The automotive body building is one area Nigeria has built a good local capacity over the years,” he said.
Mamudu said that prior to the 2020 Finance Act, local assemblers imported complete engines and carb assemblies as parts, while companies like Transit Support and Dangote Industries were beginning to invest in facilities to produce more parts locally.
He said the 2020 reduction of import tariffs on commercial vehicles from 35 per cent to 10 per cent, same as for fully built imported vehicles, led to the collapse of many assembly plants.
“Almost all of the assembly plants for commercial vehicles were shut down. “Many companies today rely on imports, and only a few still import semi-knocked down kits mainly for logistics advantages and to keep their equipment in operation,” he said.
With tariffs now at zero, he warned, remaining operators may be forced to abandon their assembly facilities altogether.
However, the National President, Association of Motor Dealers of Nigeria, Prince Ajibola Adedoyin, lauded the tariff review, saying it was an improvement.
Adedoyin said the lower tariffs would enhance vehicle availability in the Nigerian market and make vehicles more affordable to consumers.
“It’s an upgrade. “It will make things more accessible and prices more affordable,” he said.
The differing views reflect the difficult balance facing the Federal Government in trying to reduce prices for consumers, ease business costs and protect local production.
For the average Nigerian, the coming months will show if tariff cuts result in cheaper food, lower transport costs and cheaper cars, or if pressure on the exchange rate, port charges and inflation eats into the gains expected.
