Aviation Sector: FG Unveils Six Tax Relief Measures to Prevent Ticket Price Hikes
By Patience Ikpeme
The Presidential Fiscal Policy and Tax Reforms Committee has identified at least six strategic interventions within the newly enacted tax reform laws specifically designed to lower the financial load on Nigerian airlines and stabilize airfares.
Taiwo Oyedele, Chairman of the Committee, provided these clarifications in response to recent warnings by the Chairman of Air Peace, Allen Onyema. Onyema had expressed fears that the new fiscal framework could push the cost of domestic air tickets to N1 million once fully operational.
Rejecting the notion that the reforms would cripple the aviation industry, Oyedele stated that the government has maintained consistent communication with sector players.
“The Presidential Fiscal Policy and Tax Reforms Committee on behalf of the government has engaged extensively with airline operators and those engagements are ongoing,” Oyedele said. “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.”
The Committee head noted that the new legislation targets specific “long-standing tax issues driving costs in the sector” which are now being resolved or structurally addressed.
A primary pillar of this relief is the removal of the 10 percent withholding tax (WHT) on aircraft leases. Under previous regulations, this was considered a significant financial drain as it was non-recoverable for airlines.
“The single biggest tax burden on airlines has been the 10 percent withholding tax 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,” Oyedele explained.
To illustrate the impact, the Committee pointed out that on a $50 million aircraft lease, an airline currently loses $5 million to WHT, which directly tightens cash flow. The new law seeks to eliminate this burden entirely to provide structural breathing room for the sector.
Addressing concerns over Value Added Tax (VAT), Oyedele noted that while the temporary VAT suspension from the COVID-19 era was helpful, it prevented airlines from recovering “input VAT” on assets and overheads, essentially embedding those costs into their operations.
The new laws transition the industry to a “VAT-neutral” status. This means any VAT paid on imported or locally procured assets and services can be fully claimed back by the airline.
“Under the new tax laws, airlines become fully VAT-neutral. Any VAT paid on imported or locally procured assets, consumables, and services will become fully claimable,” Oyedele said.
He further added that the law mandates a refund within 30 days for any excess input VAT, supported by a dedicated refund account. “This directly reduces cost pressure and improves liquidity,” he said.
Beyond VAT and leasing credits, the government confirmed that existing exemptions on commercial aircraft, engines, and spare parts remain intact.
The new framework also introduces a path to reduce Corporate Income Tax from 30 percent to 25 percent. Furthermore, various earmarked levies—including the Tertiary Education Tax, NASENI, NITDA, and Police levies—have been consolidated into a single “Development Levy” to reduce administrative complexity.
Addressing the “multiplicity of levies” cited by industry stakeholders, Oyedele acknowledged the problem but clarified its origins.
“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.
The government’s stance comes after Air Peace CEO Allen Onyema cautioned that the domestic sector faces “serious financial strain” that could lead to a collapse. Onyema argued that the 7.5 percent VAT on tickets and spare parts, combined with high interest rates from banks, creates an unsustainable environment.
“Nigerian airlines are heavily overburdened by taxes, levies, and all manner of charges. Just take a ticket of about N350,000. What comes to the airlines is about N81,000,” Onyema said during a recent interview.
Onyema warned that if the reforms are implemented as he perceives them, “economy class tickets will go to about N1.7 million if it happens,” and suggested some airlines could go down within three months.
However, the Tax Committee countered these projections with different mathematics. Oyedele explained that because input VAT is now recoverable, the net impact on a ticket is far lower than the headline 7.5 percent rate.
“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,” the Chairman stated.
The government maintains that the tax harmonization provisions mean the environment for aviation “can only improve, not worsen, from 2026.”
Oyedele concluded by stating that while the government is listening to operators, the discourse must remain rooted in the actual provisions of the law.
“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. Claims not grounded in fact do not help this process,” he said.
