The Presidential Fiscal Policy and Tax Reforms Committee has listed a series of measures in the newly enacted tax reform laws which it said were deliberately designed to ease the tax burden on Nigerian airlines.
The Committee made this disclosure on Monday to counter claims that the reforms would trigger steep fare increases and endanger domestic operators.
Chairman of the Committee, Taiwo Oyedele, responded to recent remarks by the Chairman of Air Peace, Allen Onyema, who warned that ticket prices could climb to as high as N1 million once the new tax regime comes into effect.
Oyedele said the Committee, working on behalf of the federal government, had “engaged extensively with airline operators and those engagements are ongoing,” adding that the concerns of industry players were being taken seriously in the ongoing reform process.
According to him, “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.”
He explained that long-standing tax bottlenecks which had fuelled operating costs in the aviation sector were being addressed through the new framework.
He stated, “Several long-standing tax issues driving costs in the sector have been resolved in the new tax laws or are being structurally addressed,” noting that the provisions were crafted to strengthen airlines rather than weaken them.
One of the central components of the reform is the removal of the 10 per cent withholding tax on aircraft leases, which Oyedele described as the biggest tax burden faced by operators.
“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,” he said.
He explained that the previous withholding tax regime inflicted severe cash flow strain on airlines because the tax was non-recoverable.
“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,” he added.
Oyedele also addressed the issue of Value Added Tax (VAT) recovery, noting that while the temporary suspension of VAT in 2020 was attractive in principle, it came at a hidden cost to operators who could not claim input VAT on several operational expenses.
Under the new laws, he said, airlines would become fully VAT-neutral, with the ability to claim VAT on imported and locally procured assets, consumables, and services.
“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,” he said.
He further clarified that exemptions on commercial aircraft, engines and spare parts remain intact. “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,” he stated.
Addressing concerns over the impact of VAT on ticket prices, Oyedele said that airline operations operate on thin margins and that the effective impact of a 7.5 per cent VAT — within a VAT-recoverable system — is much lower than feared.
He explained, “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.”
According to him, the new laws also introduce a pathway to reduce corporate income tax from 30 per cent to 25 per cent, a development expected to benefit airlines and other businesses. He added that several profit-based levies — including Tertiary Education Tax, NASENI, NITDA and Police levies — had been consolidated into a single Development Levy to simplify tax administration and improve certainty.
Oyedele acknowledged the long-standing problem of multiple charges faced by airlines but insisted that these were not created by the new tax reforms.
“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,” he said.
He added that government agencies were working with operators to address these concerns. “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,” he noted.
Overall, Oyedele maintained that “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.”
His intervention followed concerns raised by Air Peace Chairman and Chief Executive Officer, Allen Onyema, who in an interview warned that the domestic aviation sector was under severe financial strain and risked collapse under the new tax regime.
Onyema said the cumulative effect of levies, charges and high borrowing costs had placed airlines under intense pressure. “The 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, everybody’s talking about the airlines as if they’re making a kill. It’s not true,” he said.
He criticised what he described as multiple and overlapping deductions, including a mandatory five per cent NCAA charge on every ticket. “We are suffering multiple taxation, multiple charges. For example, the NCAA, five percent for every ticket, mandatorily. That is to NCAA alone. There are so many other charges,” Onyema said.
He argued that the charges weaken demand and contradict international aviation standards, stating that the International Civil Aviation Organisation recommends cost-based fees rather than revenue-driven charges.
“That is, you charge according to the cost of the services you render to the airlines. Who are the ones suffering? The airlines. And that’s why the airlines are not growing,” he said.
Onyema referenced the 2020 tax law which removed customs duties and VAT on aircraft, spare parts and ticket fares, saying it had provided significant relief to operators at the time.
“Now, the tax law of 2020 removed customs duties, removed on imported aircraft and imported aircraft spares and engines, removed VAT on imported aircraft and other spare parts, removed VAT on ticket fares. That is the 2020 Act,” he said.
He warned that reintroducing VAT on aircraft purchases and spare parts — alongside high bank lending rates — could worsen the financial position of airlines. “Funds borrowed from the bank are 30–35 percent. So you bring in spare parts, you pay 7.5% on your spare parts. Ticket fares will hit $1.7 million soon. At 35% we are choking. You don’t do that,” he said.
According to him, the effect would ultimately be passed to passengers. “Because when you take five percent from what we charge, it reduces the demand… With 7.5% on ticket fares, ticket fares will hit $1.7 million soon. If we implement that tax reform, Nigerian airlines will go down in three months,” he warned.
Onyema said the Airline Operators of Nigeria had made presentations to the National Assembly and the tax reform committee to outline the severity of the situation. “We submitted, nobody listened to us. We went to the National Assembly. We addressed them on this issue and they saw reasons with us. They were surprised at the kind of facts we’re bringing out,” he said.
Despite his concerns, Onyema commended the federal government for past interventions, saying, “One thing I like about the government is that they’re listening… because I know so many things we’ve asked them to do and they did it for us.”
Responding to these concerns, Oyedele urged stakeholders to maintain constructive dialogue. “If the current engagement with industry stakeholders is sustained, the remaining non-tax issues will be resolved sooner rather than later. Claims not grounded in fact do not help this process. The new tax laws are not the problem, they are a critical part of the solution,” he said.
