Domestic airlines in Nigeria are facing an escalating financial crisis as multiple taxation and the implementation of the 2026 Tax Reform Acts begin to erode the gains of recent aviation sector reforms.
While Minister of Aviation Festus Keyamo has recorded operational milestones, industry stakeholders warn that the reintroduction of Value Added Tax (VAT) on aircraft, engines, and spare parts—effective January 1, 2026—could lead to the collapse of the local industry within months.
Charles Grant, Chief Financial Officer of Aero Contractors, recently presented data showing that Nigeria’s domestic passenger volumes have declined by approximately 3% since 2022, signaling a suppressed market in a country with over 200 million people. Grant identified a “fiscal illusion” where the government attempts to extract more revenue from a shrinking base, noting that the cost of 54 separate taxes and levies is forcing airlines to ground aircraft or cut vital routes.
He emphasized that while regional peers like Kenya and Ethiopia zero-rate aviation inputs to drive growth, Nigeria’s current policy—including the removal of zero-VAT status for international travel—makes local carriers significantly less competitive.
The Presidential Fiscal Policy and Tax Reforms Committee, led by Taiwo Oyedele, has defended the new laws, arguing they will eventually stabilize the sector by allowing airlines to reclaim input VAT and removing the 10% withholding tax on aircraft leases.
However, airline operators remain skeptical, citing “vague language” in the new laws and ongoing Customs delays for critical parts despite existing waivers. Air Peace CEO Allen Onyema warned that without an urgent review, domestic flight tickets could exceed N1 million, further pricing out the middle class and pushing travelers toward unsafe road alternatives.
