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 cause airfares to soar. Onyema warned that the reintroduction of a 7.5 % Value Added Tax (VAT) on aircraft imports, engines and spare parts could push domestic fares from around N350,000 to over N1 million.
Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, countered that Onyema’s statements are misleading and do not accurately reflect the substance of the reforms set to take effect in January 2026. Oyedele explained that the reforms aim to reduce costs and improve sustainability in an aviation sector long burdened by multiple taxes, levies and regulatory charges. Under the new tax laws, the existing 10 % withholding tax on aircraft leasing will be removed and replaced by a rate to be set by regulation, providing significant relief to airlines. For example, on a $50 million aircraft lease an airline currently pays $5 million in withholding tax; this amount will be eliminated under the new system.
Oyedele also addressed concerns about VAT. He noted that the temporary suspension introduced in 2020 created hidden costs because airlines could not recover input VAT on certain assets, consumables and overheads. The new regime will make airlines fully VAT‑neutral, allowing them to claim back any VAT paid on imported or locally procured assets, consumables and services. The government further dismissed claims that the reforms reintroduce import duties on aircraft and spare parts, affirming that existing exemptions remain in place.
Regarding fare projections, Oyedele argued that the impact of the 7.5 % VAT is far lower than suggested. A N350,000 ticket would rise to roughly N376,250, not N1.7 million. Michael Achimugu, a spokesperson for the Nigeria Civil Aviation Authority (NCAA), added that domestic airlines do not pay 18 different taxes, as some operators claim. He attributed the recent spike in airfares to market forces—particularly demand and supply—and noted that the government has provided significant support to domestic carriers.
The dispute highlights ongoing challenges in Nigeria’s aviation industry, with stakeholders disagreeing on the impact of the new tax regime. As the reforms take effect in 2026, the government and industry operators will need to collaborate to address the complex issues surrounding taxation and regulation in the sector.
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