Air Peace CEO Warns: New Tax Reform Could Collapse Nigerian Airlines in Three Months.

Allen Onyema, the Chief Executive Officer of Air Peace, issued a stark warning. He stated that new Nigerian airlines tax reform laws threaten the industry's survival. The Air Peace CEO Allen Onyema predicted a potential aviation industry collapse within three months of implementation. This crisis stems from the reintroduction of multiple taxes and levies.

The Return of Aviation Taxes

Onyema highlighted that the new tax laws reverse a key provision. The 2020 tax law had removed customs duties and Value Added Tax (VAT). These exemptions applied to imported aircraft, engines, and spare parts. The new regime brings back these significant charges.

Specifically, the new laws mandate a 7.5% VAT on imported aircraft and spare parts. Onyema used a clear example to show the financial strain. Buying an aircraft for $80 million requires paying 7.5% of that cost as VAT. This is compounded by high domestic borrowing costs. Bank interest rates in Nigeria currently range from 30 to 35 percent.

These combined factors create an impossible financial burden. The new tax laws also reintroduce VAT on airline tickets. This will further burden passengers and reduce demand.

Impact on Airline Operations

Nigerian airlines already face a regime of multiple taxation. Onyema noted that a significant portion of ticket revenue goes to statutory charges. For a typical ₦350,000 ticket, the airline only retains about ₦81,000. A mandatory 5% charge on every ticket goes to the Nigerian Civil Aviation Authority (NCAA).

This system contradicts global best practices. The International Civil Aviation Organisation (ICAO) recommends cost recovery. ICAO guidelines suggest authorities charge only for services rendered. They advise against using the aviation sector for primary revenue generation.

The reintroduction of the customs duties on imported aircraft and parts will increase operating costs greatly. Airlines need spare parts for maintenance. Higher costs will inevitably be passed to consumers. Onyema warned that soaring domestic airfares could reach ₦1 million or more.

Legislative and Industry Response

The new Nigerian Tax Act (NTA) is scheduled to take effect soon. The implementation date is set for January 1, 2026. The Presidential Fiscal Policy and Tax Reforms Committee chairman confirmed this plan.

In response to the rising costs, the House of Representatives intervened. Lawmakers asked the federal government to cut aviation taxes by 50 percent. The Senate also summoned the Minister of Aviation, Festus Keyamo, for an urgent meeting. This meeting was to address the sharp rise in domestic airfares.

Airline operators, under the Airline Operators of Nigeria (AON), presented their concerns. They submitted data to the National Assembly and the tax reform committee. However, the implementation of the new Nigerian aviation tax laws remains a threat.

Addressing Unruly Passenger Behavior

In a separate industry development, Nigerian airlines announced a new policy. Starting January 1, 2026, they will no longer tolerate unruly passenger behavior. Onyema cited instances of passengers disrupting flights. He mentioned passengers promoting themselves to business class. The airlines plan to blacklist such individuals. This move aims to enforce order and safety standards. For more updates on this and other industry matters, visit our commercial aviation news section.

This tax situation is a critical issue for the Nigerian economy. A collapse of domestic carriers would strain the banking sector. It would also reduce connectivity for passengers across the region. The aviation sector, which relies heavily on foreign exchange for assets like Airbus and maintenance, is uniquely vulnerable.