The Federal Government of Nigeria has disputed claims made by Air Peace Chairman and CEO, Allen Onyema, that the country’s new tax regime will severely impact the aviation industry and lead to significant increases in airfares. Onyema had warned that the reintroduction of a 7.5% Value Added Tax (VAT) on aircraft imports, engines, and spare parts could push domestic economy fares from around N350,000 to over N1 million.
However, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, countered that Onyema’s claims were misleading and did not accurately reflect the substance of the reforms set to take effect in January 2026. Oyedele stated that the reforms aim to reduce costs and improve sustainability in the aviation sector, which has long struggled with multiple taxes, levies, and regulatory charges.
The new tax laws, according to Oyedele, will remove the existing 10% withholding tax on aircraft leasing, replacing it with a rate to be set by regulation. This change is expected to provide significant relief to airlines, as the current withholding tax directly inflates operating costs. For instance, on a $50 million aircraft lease, an airline currently pays $5 million in withholding tax, which will be removed under the new system.
Oyedele also addressed concerns about VAT, explaining that the temporary suspension introduced in 2020 had hidden costs, as airlines were unable to recover input VAT on certain assets, consumables, and overheads. Under the new tax laws, airlines will become fully VAT-neutral, allowing them to claim back any VAT paid on imported or locally procured assets, consumables, and services.
The Federal Government has also dismissed claims that the reforms reintroduce import duties on aircraft and spare parts, stating that existing exemptions remain in place. Additionally, Oyedele argued that projected fare hikes are exaggerated, with the maximum impact of VAT being 7.5%, which would increase a N350,000 ticket to around N376,250, not N1.7 million.
The Nigeria Civil Aviation Authority (NCAA) spokesperson, Michael Achimugu, also weighed in on the issue, stating that domestic airlines do not pay 18 different taxes, as claimed by some operators. Achimugu attributed the recent spike in airfares to market forces, particularly demand and supply, and noted that the government has provided significant support to domestic airlines.
The dispute highlights the ongoing challenges faced by the aviation industry in Nigeria, with stakeholders disagreeing on the impact of the new tax regime. As the reforms are set to take effect in 2026, the government and industry operators will need to work together to address the complex issues surrounding taxation and regulation in the sector.
