The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has clarified that the new tax laws which will take effect from January 1, 2026 will help, and not hurt airlines.
Oyedele issued the clarification on Monday via a post on his personal X account, explaining that the Federal Government recognises the genuine challenges facing Nigeriaโs aviation industry, particularly the burden of multiple taxes, levies, and regulatory charges.
He added that the Presidential Fiscal Policy and Tax Reforms Committee on behalf of the government has engaged extensively with airline operators and those engagements are ongoing.
“Contrary to the claim that the new tax laws will hurt the industry, the reform is part of the solution, not the source of the problem,” Oyedele said.
According to him, several long-standing tax issues driving costs in the sector have been resolved in the new tax laws or are being structurally addressed including:
๐๐ข๐ญ๐ก๐ก๐จ๐ฅ๐๐ข๐ง๐ ๐๐๐ฑ ๐จ๐ง ๐๐ข๐ซ๐๐ซ๐๐๐ญ ๐๐๐๐ฌ๐๐ฌ
The single biggest tax burden on airlines has been the 10 percent withholding tax (WHT) on aircraft leases under the existing law. This has now been removed and replaced with a rate to be determined in a regulation, creating the legal basis for either a full exemption or a significantly lower rate.
To put this in context, on a $50 million aircraft lease, an airline currently pays $5 million in WHT, which is non-recoverable and therefore directly increases operating costs and strains cash flow. Eliminating this burden is a major structural relief for the sector.
๐๐๐ – ๐ ๐ซ๐จ๐ฆ ๐๐ข๐๐๐๐ง ๐๐จ๐ฌ๐ญ ๐ญ๐จ ๐๐ซ๐ฎ๐ ๐๐๐ฎ๐ญ๐ซ๐๐ฅ๐ข๐ญ๐ฒ
While the temporary VAT suspension introduced in 2020 following COVID-19 was attractive, it came with a hidden cost. Airlines could not recover input VAT on non-exempt items including certain assets, consumables, and overheads, meaning VAT became embedded in costs.
Under the new tax laws, airlines become fully VAT-neutral. Any VAT paid on imported or locally procured assets, consumables, and services will become fully claimable. Where an airline has excess input VAT, the law mandates a refund within 30 days, supported by a fully funded tax refund account and the option to offset VAT credits against other tax liabilities. This directly reduces cost pressure and improves liquidity.
๐๐ฆ๐ฉ๐จ๐ซ๐ญ ๐๐ฎ๐ญ๐ข๐๐ฌ
Existing exemptions on commercial aircraft, engines, and spare parts remain fully in place. There is no reversal or new burden introduced under the tax reforms.
๐๐ฆ๐ฉ๐๐๐ญ ๐จ๐ง ๐๐ข๐๐ค๐๐ญ ๐๐ซ๐ข๐๐๐ฌ
Airline operations are inherently low-margin. A 7.5 percent VAT on tickets, within a system where input VAT is fully recoverable, results in a significantly lower net impact than the headline rate suggests. Even in a worst-case scenario where VAT were not claimable, the maximum impact would still be 7.5 percent, not the price increases being suggested. That is, a N125,000 ticket becomes not more than N134,375 and a N350,000 ticket not more than N376,250.
๐๐จ๐ซ๐ฉ๐จ๐ซ๐๐ญ๐ ๐๐ง๐๐จ๐ฆ๐ ๐๐๐ฑ (๐๐๐)
The new law provides a framework to reduce corporate income tax from 30 percent to 25 percent which will benefit airlines. In addition, several earmarked profit-based levies including Tertiary Education Tax, NASENI, NITDA and Police levies have been harmonised into a single Development levy, reducing complexity and ensuring certainty.
๐๐ฎ๐ฅ๐ญ๐ข๐ฉ๐ฅ๐ ๐๐๐ฏ๐ข๐๐ฌ ๐๐ง๐ ๐๐ก๐๐ซ๐ ๐๐ฌ
The multiplicity of levies imposed on airlines and flight tickets is real, but these charges are not created by the new tax laws. It is therefore incorrect to attribute them to the reform. The government is actively working with operators and relevant agencies to achieve a lasting solution. Importantly, the tax harmonisation provisions in the new laws mean the situation can only improve, not worsen, from 2026.
In conclusion , Oyedele said overall, the new tax laws provide a strong legal and policy framework to resolve the long-standing tax challenges in the aviation sector, reduce operating costs for airlines, and ensure minimal impact on passengers.
He pointed out that if the current engagement with industry stakeholders is sustained, the remaining non-tax issues will be resolved sooner rather than later.
According to him, claims not grounded in fact do not help this process, simply because the new tax laws are not the problem, they are a critical part of the solution.
Oyedele’s clarification came after the Chairman and Chief Executive Officer of Air Peace, Allen Onyema, had cautioned that Nigeriaโs domestic aviation sector faces a serious financial strain as recently enacted tax provisions risk pushing ticket prices beyond โฆ1 million and forcing airlines to suspend operations.
Speaking in an interview with ARISE NEWS on Sunday, Onyema said urgent action is needed to prevent a potential collapse of the industry, which could have ripple effects on passengers, banks and the wider economy.
โThe Nigerian airlines are heavily overburdened by taxes, levies, and all manner of charges. Just take a ticket of about 350,000. What comes to the airlines is about 81,000 Naira. And people, everybodyโs talking about the airlines as if theyโre making a kill. Itโs not true,โ Onyema said.
He criticised what he described as multiple and overlapping charges, including a mandatory five per cent deduction on every ticket to the Nigerian Civil Aviation Authority (NCAA).
โWe are suffering multiple taxation, multiple charges. For example, the NCAA, 5% for every ticket, mandatorily. That is to NCAA alone.
There are so many other charges,โ he added. Onyema stressed that the charges undermine passenger demand and conflict with global aviation standards, noting that the International Civil Aviation Organisation (ICAO) recommends cost recovery rather than revenue generation.
โThat is, you charge according to the cost of the services you render to the airlines. Who are the ones suffering? The airlines. And thatโs why the airlines are not growing,โ he said.
