Nigeria’s aviation sector is on the brink of collapse as new tax laws, effective January 1, 2026, threaten to push domestic airfares beyond the ₦1 million mark.
Allen Onyema, Chairman and CEO of Air Peace, warned in a Sunday interview with Arise News monitored by Persecondnews that without immediate government intervention, local carriers may be forced to ground their operations.
Onyema highlighted that these “multiple and overlapping” levies—including a mandatory 5% deduction per ticket for the NCAA—create a dangerous ripple effect.
He cautioned that if these taxes are not reviewed, the resulting financial strain will hit passengers, banks, and the broader economy.
“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.
“We are suffering multiple taxation, multiple charges. For example, the NCAA, 5% for every ticket, mandatorily. That is to NCAA alone. There are so many other charges,” he said.
Onyema stressed that the charges undermine passenger demand and conflict with global aviation standards, noting that the International Civil Aviation Organisation (ICAO) recommends cost recovery rather than revenue generation.
“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 noted that the current direction reverses the progress of the 2020 tax law, which provided essential relief to operators by eliminating customs duties and VAT on aircraft, spare parts, and passenger fares.
“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.
Under the new tax law, aircraft purchases and spare parts are once again subject to 7.5 per cent VAT, he noted.
Onyema cited an $80 million aircraft purchase as an example, explaining the financial implications of the tax combined with high borrowing costs from banks, which he said range between 30 and 35 per cent.
“Funds borrowed from the bank are 30–35%. 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, warning that these pressures will inevitably be passed on to passengers.
He explained: “Because when you take 5% from what we charge, it reduces the demand. With this new tax regime?
Yes. From January. 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; at the end of the day, economy class tickets will go to about 1.7 billion Naira if it happens.”
According to him, the Airline Operators of Nigeria (AON) had repeatedly presented their concerns to the National Assembly and the tax reform committee, with officials reportedly acknowledging the scale of the burden and the risks to the wider economy.
“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.”
Describing aviation as a strategic pillar for the economy, Onyema urged the government to reinstate the VAT exemptions and duty waivers found in the 2020 Act.
He provided a stark timeline for the industry’s survival, predicting that the new tax burden would bankrupt local carriers within 30 to 90 days, subsequently endangering the banking sector.
He, however, acknowledged the federal government’s track record of responsiveness, stating that President Tinubu has consistently shown a willingness to address the concerns of aviation stakeholders.
Author
Leave a comment