Federal Government Pushes Back Against Claims That New Tax Reforms Will Crash Aviation Industry

 The Federal Government has strongly pushed back against claims by the Chairman and Chief Executive Officer of Air Peace, Allen Onyema, that Nigeria’s proposed tax reforms would cripple the aviation sector and cause domestic airfares to skyrocket beyond the reach of ordinary Nigerians.

The disagreement follows comments made by Onyema during a televised interview on Arise News, where he warned that provisions in the new Nigeria Tax Act could significantly increase the cost of operating airlines. According to him, the reforms would reintroduce a 7.5 per cent Value Added Tax (VAT) on aircraft imports, engines, and spare parts—items that have enjoyed tax relief since 2020 when the Federal Government suspended VAT during the COVID-19 pandemic.

Onyema argued that reinstating these taxes would place enormous financial pressure on airlines and ultimately force operators to pass the burden onto passengers. He claimed that economy class fares on domestic routes, currently averaging about ₦350,000, could rise to well over ₦1 million if the new tax regime is implemented.

However, the Federal Government has described those claims as misleading, exaggerated, and inconsistent with the actual content of the reforms.

Responding less than 24 hours after Onyema’s comments, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, issued a detailed rebuttal via a statement posted on his official X (formerly Twitter) account on Monday.

Oyedele insisted that the reforms scheduled to take effect in January 2026 are not designed to punish the aviation industry but rather to fix long-standing structural issues that have made airline operations unnecessarily expensive and unsustainable.

“Contrary to claims circulating in the media, the new tax laws are part of the solution, not the source of the problem,” Oyedele stated. “Several historical tax challenges that have driven up costs in the aviation sector have either been resolved under the new laws or are being addressed through broader structural reforms.

According to him, portraying the reforms as anti-aviation overlooks the extensive consultations that took place between the committee and stakeholders in the airline industry before the policy framework was finalised.

Aviation Sector’s Longstanding Struggles Acknowledged

Oyedele acknowledged that Nigeria’s aviation industry has for years battled with high operating costs, foreign exchange pressures, multiple levies, and regulatory bottlenecks. He noted that the committee was fully aware of these challenges and engaged airline operators extensively while drafting the reforms.

He emphasised that the intention of the new tax framework is to simplify compliance, eliminate duplications, reduce cash flow pressure, and create a more sustainable operating environment for airlines.

“The aviation industry has been burdened by overlapping taxes, levies, and charges for decades,” he said. “Our goal is to streamline the system and remove the most damaging cost drivers, not to introduce new ones.

NCAA Rejects Claim of “18 Different Taxes

The debate also drew a response from the Nigeria Civil Aviation Authority (NCAA). Its spokesperson, Michael Achimugu, dismissed claims that domestic airlines are subjected to as many as 18 different taxes and levies.

Achimugu described such figures as inaccurate and misleading, stating that any airline making those assertions was not being truthful.

“There is no airline in Nigeria paying 18 separate taxes to the NCAA,” he said. “Such claims do not reflect reality and only create unnecessary panic.

His comments reinforced the government’s position that some of the public narratives surrounding airline taxation are inflated and disconnected from regulatory facts.

One of the most significant changes highlighted by Oyedele relates to aircraft leasing, which he described as the single biggest tax burden faced by Nigerian airlines under the old system.

Previously, airlines were required to pay a 10 per cent withholding tax on aircraft leases. According to Oyedele, this tax was non-recoverable and directly eroded airlines’ cash flow.

“To put it simply, if an airline leased an aircraft valued at $50 million, it had to pay $5 million upfront as withholding tax, he explained. “That money comes straight out of operational cash, with no opportunity for recovery.

Under the new tax laws, this withholding tax has been removed and replaced with a rate to be determined by regulation. This, Oyedele said, creates room for either a full exemption or a significantly reduced rate. 

“This change alone represents a major structural relief for the aviation sector,” he noted, adding that it would free up capital for fleet maintenance, route expansion, and improved service delivery.

Addressing concerns about VAT, Oyedele clarified that the temporary VAT suspension introduced in 2020 came with unintended consequences that many airlines failed to acknowledge.

While VAT was suspended on aircraft and spare parts, airlines were unable to recover input VAT on several other expenses, including consumables, overheads, and certain locally procured services.

“This meant that VAT became a hidden cost rather than a neutral tax,” Oyedele explained.

Under the new tax framework, airlines will become fully VAT-neutral. Any VAT paid on imported or locally sourced assets, consumables, or services will be claimable as input VAT.

“Where an airline has excess input VAT, the law mandates a refund within 30 days or allows it to be offset against other tax obligations,” he said. “This directly improves liquidity and reduces pressure on operating costs.”

According to Oyedele, this system aligns Nigeria’s aviation taxation with global best practices and removes distortions that previously increased costs without transparency.

Oyedele also firmly rejected claims that the new tax laws reintroduce import duties on aircraft, engines, or spare parts.

“Existing exemptions on commercial aircraft, engines, and spare parts remain fully intact,” he said. “There is no reversal and no new import burden under the reforms.”

He stressed that suggestions to the contrary are unfounded and risk misleading both industry players and the traveling public.

On the issue of ticket prices, Oyedele described projections of fares rising from ₦350,000 to over ₦1 million as unrealistic and alarmist.

“Even under a worst-case scenario where VAT is not recoverable, the maximum impact would be 7.5 per cent,” he explained. “A ₦350,000 ticket would rise to approximately ₦376,250—not ₦1.7 million.”

He argued that such exaggerated figures do not reflect the actual mechanics of the tax system and could unnecessarily frighten passengers while undermining confidence in the aviation sector.

The Federal Government maintains that the broader objective of the tax reforms is to create a fairer, more predictable fiscal environment that supports long-term growth across all sectors, including aviation.

Oyedele reiterated that the reforms are part of a comprehensive effort to modernise Nigeria’s tax system, eliminate inefficiencies, and encourage investment.

“The aviation industry is critical to economic growth, trade, tourism, and national connectivity,” he said. These reforms are designed to support that role, not undermine it.

While acknowledging the concerns of airline operators, the government urged industry leaders to engage constructively and rely on verified information when discussing policy changes.

Officials warned that spreading inaccurate interpretations of the reforms could damage investor confidence and slow progress toward building a more competitive aviation industry.

As the January 2026 implementation date approaches, stakeholders are expected to continue discussions to ensure clarity, transparency, and smooth adoption of the new tax regime.

For now, the Federal Government remains firm in its position: Nigeria’s tax reforms are not a threat to aviation but a necessary step toward fixing the deep-rooted issues that have plagued the industry for years.