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December 29, 2025 | 1:38 pm
The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has clarified that Nigeria’s new tax laws are intended to support—not harm—the aviation industry, countering growing concerns from airline operators.
Oyedele’s clarification follows comments made on Sunday by Air Peace Chairman and CEO, Allen Onyema, during an interview on Arise News. Onyema warned that provisions of the Nigeria Tax Act and related fiscal reforms, scheduled to take effect in January 2026, could significantly raise airfares.
According to Onyema, the laws reintroduce a 7.5 per cent Value Added Tax (VAT) on aircraft imports, engines, and spare parts—charges that were suspended in 2020 during the COVID-19 pandemic. He suggested the move could drive domestic economy fares from about ₦350,000 to as high as ₦1.7 million.
However, in a statement shared on X (formerly Twitter) on Monday, Oyedele acknowledged the sector’s long-standing challenges—including multiple taxes, levies, and regulatory charges—but stressed that the new laws are part of the solution.
“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,” Oyedele said.
“Several long-standing tax issues driving costs in the sector have been resolved in the new tax laws or are being structurally addressed.”
How the New Tax Laws Will Benefit Airlines
Oyedele outlined six key reforms designed to ease operating costs, improve liquidity, and stabilise ticket prices:
1. Withholding Tax on Aircraft Leases
Under the previous regime, airlines paid a 10 per cent withholding tax (WHT) on aircraft leases—one of the industry’s biggest tax burdens.
This provision has now been removed and replaced with a rate to be set by regulation, creating room for full exemption or a much lower rate.
To illustrate the impact, Oyedele noted that an airline leasing a $50 million aircraft currently pays $5 million in non-recoverable WHT, directly increasing costs and straining cash flow. Eliminating this burden offers major structural relief.
2. VAT: From Hidden Cost to True Neutrality
While the VAT suspension introduced in 2020 appeared beneficial, it had hidden drawbacks. Airlines were unable to recover input VAT on several non-exempt items, causing VAT to be embedded in operating costs.
Under the new tax laws:
- Airlines become fully VAT-neutral
- VAT paid on imported or locally sourced assets, consumables, and services is fully recoverable
- Excess input VAT must be refunded within 30 days
- Refunds are backed by a fully funded tax refund account
- VAT credits can be offset against other tax liabilities
This reform, Oyedele said, will significantly reduce cost pressure and improve liquidity.
3. Import Duties
Existing exemptions on commercial aircraft, engines, and spare parts remain unchanged.
“There is no reversal and no new burden introduced under the tax reforms,” Oyedele emphasised.
4. Impact on Ticket Prices
Airlines operate on thin margins, but Oyedele explained that a 7.5 per cent VAT on tickets, within a system where input VAT is fully recoverable, results in a far smaller net impact than widely suggested.
Even in a worst-case scenario where VAT is not recoverable, the maximum increase remains 7.5 per cent:
- A ₦125,000 ticket rises to ₦134,375
- A ₦350,000 ticket rises to ₦376,250
These figures, he said, contradict claims of extreme fare hikes.
5. Corporate Income Tax (CIT)
The new law introduces a framework to reduce Corporate Income Tax from 30 per cent to 25 per cent, offering direct relief to airlines.
In addition, several profit-based levies—Tertiary Education Tax, NASENI, NITDA, and Police levies—have been consolidated into a single Development Levy, reducing complexity and improving predictability.
6. Multiple Levies and Charges
Oyedele acknowledged the burden of multiple levies imposed on airlines and flight tickets but clarified that these charges were not created by the new tax laws.
The government, he said, is working with airline operators and relevant agencies to develop lasting solutions. Importantly, the tax harmonisation provisions mean the situation can only improve—not worsen—from 2026.
Conclusion
The Presidential Committee concluded that the new tax laws provide a strong legal and policy framework to address long-standing challenges in the aviation sector, reduce operating costs, and minimise the impact on passengers.
Stakeholders were urged to prioritise constructive engagement over what the committee described as unsubstantiated claims, as implementation approaches in 2026.
