Will New Tax Laws Ground Nigerian Airlines and Push Fares Past ₦1 Million?

Nigeria’s commercial aviation sector faces deep financial uncertainty. New tax laws, effective January 1, 2026, have sparked major controversy. Airline operators warn the changes will cripple the industry. They cite a reversal of previous tax waivers.

Airline Operators Sound Alarm

Air Peace Chairman Allen Onyema issued a stark warning. He claimed the new tax laws could push domestic airfares beyond ₦1 million. Onyema, who is Vice-President of the Airline Operators of Nigeria (AON), stated airlines face severe financial strain. He noted that a typical ₦350,000 ticket yields only about ₦81,000 for the carrier. Multiple taxes and levies consume the rest of the revenue.

Onyema criticized the mandatory 5% deduction on every ticket. This charge goes to the Nigerian Civil Aviation Authority (NCAA). He also claimed the new laws reintroduce a 7.5% VAT on aircraft purchases and spare parts. This reverses a 2020 tax law that exempted these essential imports. Such costs, combined with high bank interest rates, are unsustainable. He warned that local carriers might be forced to suspend operations.

Government Counters Claims with Structural Relief

The Presidential Fiscal Policy and Tax Reforms Committee defended the new laws. Chairman Taiwo Oyedele called the reforms a solution to long-standing issues. He stated the biggest structural relief is the removal of the 10% withholding tax (WHT) on aircraft leases. This WHT was a non-recoverable, major cost burden on airlines. For a $50 million aircraft lease, this tax was previously $5 million. The new law replaces this fixed rate with a flexible, regulation-set rate.

Oyedele also clarified the Value Added Tax (VAT) on tickets. The temporary VAT waiver was a COVID-era measure. He said the waiver prevented airlines from reclaiming input VAT. This created hidden costs embedded in operations. Under the new laws, airlines become VAT-neutral. They can now fully reclaim input VAT on maintenance, leases, and consumables. This is a potential source of millions of dollars in refunds. Oyedele also asserted that existing import duty exemptions on commercial aircraft and spare parts remain in place. He dismissed the ₦1 million fare prediction. He estimated the maximum impact of the 7.5% ticket VAT would raise a ₦350,000 ticket to about ₦376,250.

The Deep-Rooted Burden of Multiple Charges

Despite the government’s structural concessions, the industry faces a high tax burden. Operators report paying over 30 different charges and levies. These include landing, parking, and cargo service charges paid to the Federal Airports Authority of Nigeria (FAAN). IATA data highlights the severity of the issue. IATA has ranked Abuja and Lagos airports as the most expensive globally for charges and levies. International passengers departing Nigeria already pay an average of $180 in taxes. This is nearly three times the African average of $68.

Experts warn the new tax regime could severely impact the economy. Captain Ado Sanusi of Aero Contractors suggested a 10-20% drop in aviation’s GDP contribution. The sector's direct contribution was $449.7 million in 2024 (according to the source). Furthermore, the return of the 7.5% VAT on tickets, combined with the 5% Ticket Sale Charge, creates a total 12.5% charge on fares. This cumulative burden will inevitably be passed to passengers.

Outlook for Commercial Aviation

The core issue is the multiplicity of taxes, not just the new laws. ICAO guidelines suggest aviation authorities should operate on a cost-recovery basis. Over-taxing the industry limits its capacity to support trade and job creation. An aviation analyst noted that the sector supports about 39,500 direct jobs. These jobs are now at risk due to reduced profitability and capacity cuts. The government's removal of the WHT on leases is a significant positive step. However, airlines require further incentives to ensure long-term stability. Targeted relief, such as duty waivers on safety-critical parts, is necessary. Continued dialogue between the government and the AON is essential for a stable future for commercial aviation news in the region.

• Structural Relief: The new laws eliminate the 10% withholding tax on aircraft leases.
• Airline Concern: Reinstatement of 7.5% VAT on tickets and potential VAT on aircraft parts adds to over 30 existing charges.
• Economic Impact: Experts predict a 10-20% contraction in aviation's GDP contribution from 2026.
• Global Context: IATA ranks Abuja and Lagos as the world's most heavily taxed airports for charges.