The aviation sector may experience a sharp decline in output and employment following the full implementation of the tax reforms, scheduled to take effect from January 1, 2026.

Aviation experts warned that the reforms could slash aviation’s gross domestic product (GDP) contribution by up to 20 per cent and cut the current 39,500 direct jobs in the sector by as much as 30 per cent.

The tax reforms introduced by the current administration aim to boost government revenue, improve tax administration, enhance transparency and reduce tax burdens on selected sectors.

However, aviation analysts argued that the policy could have damaging effects on an industry already battling rising operating costs, volatile foreign exchange, multiple charges, and declining passenger purchasing power.

According to the International Air Transport Association (IATA) in its 2023/2024 ‘Value of Air Transport to Nigeria’s Economy’ report, aviation contributed $2.5 billion to Nigeria’s GDP — about 0.7 per cent — and supported 39,500 direct jobs, with an additional 216,700 indirect and induced jobs across the supply chain, employee consumption and tourism.

Airlines alone contributed $449.7 million and provided 29,900 direct jobs.
But experts feared that the new tax regime could significantly weaken these numbers.

Managing Director, Aero Contractors, Capt. Ado Sanusi said the sector could experience a 10–20 per cent drop in GDP contribution if the Act was implemented without industry-specific waivers.

Sanusi said aviation was already one of the most heavily taxed sectors in Nigeria, and the new framework, which expands VAT on aircraft parts, fuel, insurance, maintenance and air tickets, would further raise costs and depress demand.

Sanusi noted that airlines’ direct contribution, estimated at $449.7 million in 2024, could fall by 10–25 per cent from 2026, depending on demand elasticity, adding that smaller and newer airlines may struggle to survive and could exit the market or be forced into mergers.

He also projected a 10–30 per cent drop in direct aviation jobs, saying operators would likely reduce capacity, cut routes and delay fleet expansion to cope with higher costs.

These cutbacks, he added, would affect ground handlers, caterers, training schools, maintenance organisations and airport concessionaires.

Sanusi advised the government to consider targeted incentives, including tax credits, reduced VAT on tickets, and import-duty waivers on aircraft parts to help stabilise the sector.

Also, the former Rector of the Nigerian College of Aviation Technology (NCAT), Capt. Samuel Caulcrick also expressed concern over the return of VAT on air transport.

He said the move added to the existing 5 per cent Ticket Sales Charge (TSC) and Cargo Sales Charge (CSC), raising the total tax burden on passengers to 12.5 per cent.

Caulcrick described this as discriminatory since road, rail and sea transport remained VAT-exempt.

He warned that airlines would transfer the higher costs to passengers, leading to increased fares, reduced demand, job losses and weaker connectivity.

He recommended suspending either the new VAT regime or the existing TSC/CSC to ease the pressure on operators before January 2026, adding that safety-critical aircraft parts should be exempted from VAT.

“The aviation sector is vital for economic growth and job creation. Over-taxing the industry could undermine its capacity to support trade, investment and regional integration,” he said.

Aviation analyst, Adeola Araba, predicted that airlines’ direct financial contribution could fall by up to 20 per cent in the short term as operators struggle to maintain profitability under the expanded tax burden.

He said without urgent intervention, the aviation sector could face its most difficult period since the COVID-19 pandemic.

At a recent aviation tax webinar jointly organised by Aviation & Allied Business and the Federal Inland Revenue Service (FIRS), IATA accused the Federal Government of violating multiple international treaties by reintroducing VAT on air transportation.

The Area Manager, West and Central Africa, IATA, Dr Samson Fatokun, said Nigeria was contravening the December 2024 ECOWAS Treaty, which prohibited taxes on air passengers and cargo and the International Civil Aviation Organisation (ICAO) conventions that discourage VAT on international air transport.

He also highlighted that airlines currently pay the 5 per cent TSC and CSC, which he described as burdensome. Fatokun argued that the charges already inflate ticket prices and discourage potential passengers.