The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, has pushed back against claims that new tax reforms will worsen the financial strain on airlines. According to him, the new tax laws are designed to ease long-standing pressures in the aviation sector, not compound them.
Oyedele acknowledged that Nigeria’s aviation industry faces real and persistent challenges, especially the burden of multiple taxes, levies, and regulatory charges. He said the committee, acting on behalf of the Federal Government, has engaged extensively with airline operators and industry stakeholders, with discussions still ongoing. These engagements, he stressed, informed key provisions of the reforms.
Contrary to fears expressed in some quarters, Oyedele said several structural tax issues that have driven up airline operating costs for years have either been resolved outright or addressed within the framework of the new laws.
One of the most significant changes concerns withholding tax on aircraft leases. Under the old system, airlines were required to pay a 10 percent withholding tax on leased aircraft. This tax was non-recoverable and directly increased costs. Oyedele described it as the single biggest tax burden on airlines. The new law removes this fixed rate and replaces it with a rate to be determined by regulation, creating room for either a full exemption or a much lower rate. He explained that on a 50-million-dollar aircraft lease, an airline previously paid about 5 million dollars in withholding tax, a cost that strained cash flow and operations. Eliminating or sharply reducing this burden, he said, offers major relief.
On value added tax, Oyedele said the temporary VAT suspension introduced after COVID-19 in 2020 appeared attractive but carried hidden costs. Airlines were unable to recover input VAT on several items, including assets, consumables, and overheads, meaning VAT was embedded in their operating expenses. Under the new tax laws, airlines become fully VAT-neutral. VAT paid on imported or locally procured assets, consumables, and services will now be claimable. Where excess input VAT exists, the law mandates a refund within 30 days, supported by a dedicated and funded tax refund account. Airlines also have the option to offset VAT credits against other tax liabilities, a move Oyedele said will reduce cost pressure and improve liquidity.
He also clarified that import duty exemptions on commercial aircraft, engines, and spare parts remain fully intact. The reforms do not introduce any reversal or new import duty burden on the sector.
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Addressing concerns over ticket prices, Oyedele noted that airline operations are typically low-margin. He explained that a 7.5 percent VAT on tickets, within a system where input VAT is fully recoverable, has a far lower net impact than many assume. Even in a worst-case scenario where VAT is not recoverable, the maximum increase would still be limited to 7.5 percent. In practical terms, he said, a ticket priced at N125,000 would rise to no more than N134,375, while a N350,000 ticket would increase to about N376,250, figures far below the dramatic hikes being suggested in public debate.
On corporate income tax, Oyedele said the new law provides a framework to reduce the rate from 30 percent to 25 percent, a change that will benefit airlines. He added that several profit-based levies, including Tertiary Education Tax, NASENI, NITDA, and Police levies, have been harmonised into a single Development Levy. This, he said, reduces complexity and gives businesses greater certainty.
Oyedele acknowledged that the issue of multiple levies and charges on airlines and flight tickets is real, but stressed that these are not created by the new tax laws. Blaming the reforms for these charges, he said, is incorrect. He noted that government is working with operators and relevant agencies to find a lasting solution, and that the tax harmonisation provisions mean the situation should improve rather than worsen from 2026.
Oyedele concluded that the new tax laws provide a solid legal and policy framework to resolve long-standing tax challenges in the aviation sector, reduce operating costs, and limit the impact on passengers. He added that sustained engagement with industry stakeholders will help resolve remaining non-tax issues, warning that claims not grounded in fact only distract from solutions. According to him, the new tax laws are not the problem but a key part of the solution.
