Nigeria’s aviation industry stands to benefit rather than suffer from the new tax laws recently introduced by the Federal Government, according to the Presidential Fiscal Policy and Tax Reforms Committee. The committee said ongoing engagement with airline operators shows that the reforms directly address long-standing cost drivers that have constrained airline operations for years.
The committee acknowledged that Nigerian airlines face genuine operational pressures, especially from multiple taxes, levies, and regulatory charges. However, it stressed that the new tax laws were designed after extensive consultations and are part of a broader effort to stabilise the sector. According to the committee, these engagements are continuing and form the basis of targeted fiscal adjustments across aviation.
“We recognise the genuine challenges facing Nigeria’s aviation industry, particularly the burden of multiple taxes, levies, and regulatory charges,” the committee said. “The Presidential Fiscal Policy and Tax Reforms Committee, on behalf of the government, has engaged extensively with airline operators, and those engagements are ongoing.”
Contrary to widespread claims, the committee stated that the new tax laws are not the source of rising airline costs. Instead, they provide structural solutions to several legacy issues that have historically driven up operating expenses. One of the most significant interventions relates to aircraft leasing, which accounts for a large share of airline expenditure.
Under the previous tax regime, airlines were subject to a ten per cent withholding tax on aircraft leases, a charge the committee described as the single biggest tax burden on operators. The new tax laws remove this fixed rate and replace it with a regulation-driven framework, creating room for either a full exemption or a substantially lower rate. The committee explained that this change alone delivers immediate relief to airline balance sheets.
“To put this in context, on a fifty-million-dollar aircraft lease, an airline currently pays five million dollars in withholding tax,” the committee noted. “This amount is non-recoverable and directly increases operating costs while straining cash flow. Eliminating this burden is a major structural relief for the sector.”
Value Added Tax treatment under the new tax laws also represents a shift from what the committee described as a hidden cost structure to true neutrality. While the temporary VAT suspension introduced during the COVID-19 period appeared attractive, airlines were unable to recover input VAT on several items, including assets and overheads. As a result, VAT became embedded in operating costs.
The committee said the new tax laws correct this imbalance by making airlines fully VAT-neutral. VAT paid on imported or locally sourced assets, consumables, and services becomes fully claimable. Where excess input VAT exists, the law mandates refunds within thirty days, supported by a dedicated tax refund account or offset mechanisms against other liabilities. According to the committee, this directly improves liquidity and reduces cost pressure.
Import duties were another area of concern raised by operators, but the committee clarified that existing exemptions on commercial aircraft, engines, and spare parts remain intact under the new tax laws. It said there is no reversal of these exemptions and no new import-related burden introduced through the reforms.
On passenger fares, the committee argued that fears of sharp ticket price increases are overstated. Airline operations remain low-margin by nature, and within a system where input VAT is recoverable, the net impact of a 7.5 per cent VAT on tickets is significantly lower than headline figures suggest. Even in a worst-case scenario, the committee said, the increase would be modest and far below speculative projections.
“A one hundred and twenty-five-thousand-naira ticket becomes not more than one hundred and thirty-four thousand, three hundred and seventy-five naira,” the committee explained. “Similarly, a three hundred and fifty-thousand-naira ticket rises to no more than three hundred and seventy-six thousand, two hundred and fifty naira.”
The new tax laws also introduce a framework for reducing corporate income tax from thirty per cent to twenty-five per cent, a move the committee said would benefit airlines over the medium term. In addition, several profit-based levies, including education and technology charges, have been harmonised into a single development levy. This, the committee noted, reduces complexity and improves predictability for operators.
Addressing concerns about multiple levies and charges, the committee admitted the problem exists but stressed that these charges were not created by the new tax laws. It said attributing them to the reforms is inaccurate, adding that government is actively working with operators and relevant agencies to achieve lasting solutions. Importantly, the harmonisation provisions within the new tax laws mean the situation can only improve from 2026.
Overall, the committee maintained that the new tax laws provide a strong legal and policy framework to resolve long-standing fiscal challenges in aviation. By lowering operating costs, improving cash flow, and ensuring minimal impact on passengers, the reforms are positioned as part of the solution rather than the problem.
“If the current engagement with industry stakeholders is sustained, the remaining non-tax issues will be resolved sooner rather than later,” the committee said. “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.”
