Will New Tax Laws Ground Nigerian Airlines as Domestic Passenger Traffic Plummets?

The Nigerian commercial aviation sector is facing a critical challenge. Airline operators are voicing strong concerns over a new tax regime. They argue that the cumulative effect of existing and new levies threatens their financial viability. This fiscal pressure comes as the domestic air travel market is already contracting.

Data from the Federal Airports Authority of Nigeria (FAAN) shows a significant decline. Domestic passenger traffic fell to 12.54 million in 2024. This is down from 14.52 million recorded in 2022. The drop represents a sharp 13.6% contraction over three years. Industry leaders attribute this slump to rising airfares. These costs are increasingly beyond the means of most Nigerian travelers.

The Burden of Multiple Charges

Domestic carriers operate under a heavy load of fees. Investigations reveal airlines face no fewer than 54 separate charges, fees, and taxes. Only a handful of these are directly visible to passengers. These numerous payments are spread across major government agencies. Key agencies include the Nigeria Civil Aviation Authority (NCAA), the Nigerian Airspace Management Agency (NAMA), and FAAN.

The Nigeria Civil Aviation Authority (NCAA) collects several key levies. These include a 5% Ticket Sales Charge (TSC). The NCAA also collects a $20 security levy. Furthermore, an Advanced Passenger Information System (APIS) levy of $11.50 per ticket commenced in December 2025. This new fee is applied to international tickets.

Meanwhile, FAAN collects the Passenger Service Charge (PSC). It also collects the Common User Terminal Equipment (CUTE) fee. FAAN also receives the Passenger Terminal Facility Charge. Beyond these, FAAN collects about 18 separate payments from airlines. These range from hourly fees to boarding bridge charges.

The New Tax Regime and Industry Alarm

The introduction of new tax laws, effective January 1, 2026, has intensified the crisis. A major point of contention is the reintroduction of Value Added Tax (VAT). This VAT is applied to airline tickets, spares, and aircraft imports. This move reverses previous concessions meant to stabilize costs.

Airline operators argue this new tax structure is counterproductive. They warn it will worsen the airline financial burden. Carriers are already struggling with high operating costs. These include expensive insurance premiums and high foreign exchange rates. The high cost of aircraft maintenance overseas is also a factor.

International Best Practices and Regulatory Alignment

Industry bodies stress the need for policy alignment. The International Air Transport Association (IATA) advocates for global standards. IATA and the International Civil Aviation Organization (ICAO) recommend zero-rating aviation inputs. This includes spares, maintenance, and fuel. Regional peers like Kenya and Rwanda already follow this practice. Stakeholders argue the new VAT contradicts these international norms.

One aviation expert noted that the current fiscal approach is not sustainable. The goal should be to grow the market first. Excessive taxation on the sector risks a shrinking revenue base. Authorities must consider the impact on airfare affordability. The current path risks pushing high airfares further up. This could bankrupt domestic airlines still in operation.

Impact on Passengers and Market Contraction

The decline in domestic air travel is a clear warning sign. Losing nearly two million domestic air travelers in two years is significant. This contraction exposes structural weaknesses in the aviation economy. The financial strain on airlines leads to reduced competition. This results in fewer flights and higher ticket prices. The entire aviation ecosystem relies on healthy airlines to fly. Urgent fiscal recalibration is necessary. This will ensure the sector can fulfill its potential. For more insights on the global air transport market, visit our commercial aviation news section. The European Union Aviation Safety Agency (EASA) and major manufacturers like Boeing also emphasize stable regulatory environments for growth.