The federal government has defended Nigeria’s new tax laws, insisting that the reforms will ease, rather than worsen the financial pressure on the aviation industry.
According to the Presidential Fiscal Policy and Tax Reforms Committee, the new framework directly addresses several long-standing tax issues that have driven up airline operating costs over the years.
In a detailed explanation by the Committee’s Chairman, Mr Taiwo Oyedele, the government acknowledged the genuine challenges facing airlines, including multiple taxes, levies and regulatory charges.
This comes after the chairman of Air Peace, Mr Allen Onyema, cautioned that Nigeria’s domestic aviation sector faces a serious financial strain as the tax provisions set to kick start by 2026 risk pushing ticket prices beyond N1 million and forcing airlines to suspend operations.
In a lengthy post on X, formerly known as Twitter, Mr Oyedele noted that extensive consultations with airline operators have taken place and that engagements with stakeholders are ongoing to ensure the reforms deliver tangible relief.
He explained that at the centre of the reforms is the removal of the 10 per cent withholding tax (WHT) on aircraft leases, which has historically been the single largest tax burden on Nigerian airlines. Under the previous regime, airlines paid non-recoverable WHT on leased aircraft, significantly increasing costs and straining cash flow.
He said the new tax laws eliminate this automatic charge and replace it with a rate to be determined by regulation, opening the door for a full exemption or a substantially reduced rate.
“A $50 million aircraft lease previously attracted $5 million in WHT—an amount airlines can now avoid under the new framework,” he illustrated.
The reforms also overhaul the treatment of Value Added Tax (VAT) in the sector. While the temporary VAT suspension introduced after COVID-19 appeared beneficial, it effectively embedded VAT into airline costs because input VAT on assets, consumables and overheads could not be recovered. Under the new laws, airlines become fully VAT-neutral. VAT paid on imported or locally sourced goods and services will be fully claimable, with refunds mandated within 30 days where excess credits arise.
Mr Oyedele said the system is backed by a dedicated tax refund account and allows VAT credits to be offset against other tax liabilities, improving liquidity and reducing cost pressures.
On import duties, the government clarified that existing exemptions on commercial aircraft, engines and spare parts remain intact.
“The new tax laws do not introduce any reversal or additional burden in this area, preserving critical cost relief for airlines that depend heavily on imported equipment,” he said.
He also addressed concerns around ticket prices, noting that the committee is understands that aviation is a low-margin business and that a 7.5 per cent VAT on tickets, within a system of full input VAT recovery, has a much smaller net impact than widely assumed. Even in a worst-case scenario where VAT is not recoverable, the maximum increase would still be limited to the headline 7.5 per cent.
“For example, a N125,000 ticket would rise to no more than N134,375, while a N350,000 ticket would not exceed N376,250,” he said.
The tax titan also noted that further relief is expected from changes to corporate taxation. The new laws provide a framework to reduce corporate income tax from 30 per cent to 25 per cent, a move that would directly benefit airlines.
In addition, several profit-based levies—such as Tertiary Education Tax, NASENI, NITDA and Police levies—have been harmonised into a single Development Levy. This consolidation reduces complexity, lowers the cumulative burden and provides greater certainty for operators.
Addressing complaints about multiple levies and charges on airlines and tickets, the committee clarified that these are not products of the new tax laws. Rather, they are legacy issues that the government is working to resolve through collaboration with industry players and relevant agencies.
Mr Oyedele also maintained that the new tax laws offer a strong legal and policy foundation to resolve long-standing challenges in the aviation sector. By lowering operating costs, improving cash flow and ensuring minimal impact on passengers, the reforms are positioned as a critical part of the solution to the industry’s problems—not the cause.
He stressed that sustained engagement with stakeholders will be key to addressing remaining non-tax issues and ensuring the full benefits of the reforms are realised.
He added that claims not grounded in fact risk undermining progress, noting that the new tax laws are designed to support the long-term viability and growth of Nigeria’s aviation industry.