Chairman and Chief Executive Officer of Air Peace, Allen Onyema, has warned that Nigeria’s domestic aviation industry is heading for a major crisis as newly introduced tax laws threaten to push economy-class airfares to as high as ₦1.7 million and force airlines out of business.
Onyema said the combination of renewed taxation, multiple levies, and high borrowing costs could cripple local airlines within months if the policy is not urgently reviewed.
He spoke on ARISE News on Sunday.
According to him, Nigerian airlines are already overburdened by excessive taxes and statutory deductions, yet are unfairly portrayed as profiteers. He explained that only a small fraction of ticket revenue actually goes to airline operators after mandatory charges are deducted.
“The Nigerian airlines are heavily overburdened by taxes, levies, and all manner of charges. If you take a ticket of about ₦350,000, what comes to the airline is roughly ₦81,000. Yet people talk as if airlines are making huge profits. That is not true,” Onyema said.
He criticised what he described as multiple and overlapping charges, including a compulsory five per cent deduction on every ticket sold to the Nigeria Civil Aviation Authority (NCAA), in addition to several other fees imposed by government agencies.
“We are suffering multiple taxation and multiple charges. For example, the NCAA alone takes five per cent from every ticket sold. There are many other charges on top of that,” he said.
Onyema argued that the policy contradicts global aviation standards, noting that the International Civil Aviation Organisation (ICAO) discourages governments from using aviation as a revenue-generating tool.
“ICAO makes it clear that aviation charges should be based on cost recovery, not revenue generation. You charge airlines only for the cost of services rendered. What is happening here is stifling growth and hurting the airlines,” he said.
He recalled that the 2020 Finance Act provided critical relief to the industry by removing customs duties and Value Added Tax (VAT) on imported aircraft, spare parts, engines, and ticket fares.
“The 2020 Act removed customs duties on imported aircraft and spares, removed VAT on aircraft, spare parts, and ticket fares. Even with that, airlines were still struggling under other charges,” Onyema said.
However, he lamented that the new tax law has reversed those concessions. Under the current regime, imported aircraft and spare parts now attract 7.5 per cent VAT.
“If you buy an aircraft worth $80 million, you are now expected to pay 7.5 per cent VAT on that amount. The same applies to spare parts,” he said.
Onyema warned that when these taxes are combined with bank lending rates of between 30 and 35 per cent, airline operations become unsustainable.
“Funds borrowed from banks attract interest rates of 30 to 35 per cent. You import spare parts and still pay 7.5 per cent VAT. At that point, you are choking the airlines,” he said.
He cautioned that the burden would inevitably be passed on to passengers, predicting a sharp rise in domestic airfares if the new tax regime is fully implemented.
“With 7.5 per cent VAT on ticket fares and all these deductions, economy-class tickets could rise to about ₦1.7 million. If this tax reform is implemented as it is, Nigerian airlines could start collapsing within three months,” Onyema warned.
He said airline operators, through the Airline Operators of Nigeria (AON), have repeatedly engaged government authorities, including the National Assembly and the tax reform committee, to highlight the dangers of the policy.
“We went to the National Assembly and presented the facts. They were surprised by the scale of the burden on airlines. We also met with the government’s tax consultants and the chairman of the task force. They understood our concerns and were genuinely worried,” he said.
Onyema stressed that aviation is a strategic sector that drives economic growth and national integration, not one to be exploited for short-term revenue.
“Airlines all over the world are supported by governments, even private ones. We are not asking for handouts. All we are asking is to return to the 2020 Act, which respected aviation. Remove VAT on ticket fares to help the common man. Remove VAT on imported aircraft and spares, and, if possible, create a special funding window for airlines,” he said.
He warned that failure to amend the law could trigger airline failures and significant losses for Nigerian banks that have financed aircraft purchases.
“If this tax reform goes ahead, some airlines will go down within a month, others within three months. The banks will also be badly hit because of their exposure to aircraft financing,” he said.
Despite his concerns, Onyema expressed cautious optimism, noting that the federal government has shown willingness to listen to industry stakeholders in the past.
“One thing I appreciate about this government is that they listen. Many issues we raised before were addressed. I believe they will still do the right thing if they fully understand the consequences of this policy,” he added.