The chairman of Presidential Fiscal Policy and Tax Reforms Committee has dismissed claim that the new tax laws will lead to the death of Nigeria’s aviation sector. He said this while reacting to claim by Allen Onyema, the chairman of Air Peace in a television interview that the new tax laws scheduled to come into effect in January 2026 would lead to massive fare hikes and force airlines out of business.
While disputing the claim, Oyedele said contrary to the claim of Onyema, Oyedele said 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. ,
Oyedele who acknowledged that the burden of multiple taxes, levies, and regulatory charges are some of the challenges facing Nigeria’s aviation industry, said his committee engaged extensively with airline operators over the issues and and the engagements are ongoing.
But he insisted that contrary to the claim that the new tax laws will hurt the industry, several long-standing tax issues driving costs in the sector have been resolved in the new tax laws or are being structurally addressed
Oyedele listed these to include the 10 percent withholding tax (WHT) on aircraft leases under the existing law that 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,” Oyedele said.
He also noted that while the temporary VAT suspension introduced in 2020 on the sector following COVID-19 was attractive, it came with a hidden cost. He said this was because airlines could not recover input VAT on non-exempt items including certain assets, consumables, and overheads, meaning VAT became embedded in costs.
But he noted that under the new tax laws, airlines have 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.”
It added that existing exemptions on import duties for commercial aircraft, engines, and spare parts remain fully in place as there are no reversal or new burden introduced under the tax reforms.
“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,” Oyedele further said
He added that the new tax law provided a framework to reduce corporate income tax from 30 percent to 25 percent and this will benefit the 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.
Oyedele noted that while the multiplicity of levies imposed on airlines and flight tickets is real, they were 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”
“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,” Oydele said.