Nigeria’s Aviation Crisis: New Tax Law Threatens Industry Collapse and Million-Naira Fares
An analysis of the impending tax changes and their potential to cripple domestic air travel and the broader economy.
LAGOS – Nigeria’s aviation industry is facing an existential threat that could see domestic airfares skyrocket beyond ₦1 million and force major carriers to cease operations within months, according to a stark warning from one of the country’s leading airline executives. The catalyst is a new tax law set to take effect on January 1, 2026, which industry leaders argue reverses critical protections and imposes unsustainable financial burdens.
The CEO’s Dire Warning: A Ripple Effect of Collapse
Allen Onyema, Chairman and CEO of Air Peace, issued a public plea for government intervention during a recent interview with Arise News. His warning paints a picture of an industry on the brink, suffocated by what he describes as “multiple and overlapping” levies. The most significant among these is a mandatory 5% deduction per ticket for the Nigerian Civil Aviation Authority (NCAA), a charge Onyema states conflicts with global standards set by the International Civil Aviation Organisation (ICAO).
“The Nigerian airlines are heavily overburdened,” Onyema stated. “Just take a ticket of about ₦350,000. What comes to the airlines is about ₦81,000.” This dramatic disparity, he argues, reveals an unsustainable business model where carriers bear the brunt of revenue-generating taxes rather than cost-recovery fees.
Rolling Back Progress: The 2020 Act vs. The 2026 Law
The core of the crisis lies in the reversal of the 2020 Finance Act, which was hailed as a lifeline for the aviation sector. That legislation provided essential relief by eliminating Value Added Tax (VAT) on passenger fares and removing customs duties and VAT on imported aircraft, engines, and spare parts.
The new law, effective in 2026, reinstates a 7.5% VAT on these critical inputs. Onyema illustrated the impact with an $80 million aircraft purchase, explaining that when combined with Nigeria’s high bank borrowing rates of 30-35%, the added tax creates an impossible financial equation. “We are choking,” he warned, emphasizing that these costs will be inevitably passed to consumers.
Beyond Ticket Prices: Systemic Risk to the Economy
The implications extend far beyond expensive flights. Onyema framed aviation as a strategic economic pillar, warning that the collapse of local carriers would have a domino effect. He predicted that under the new tax regime, airlines could be bankrupted within 30 to 90 days, subsequently endangering the banking sector which holds their loans and leases.
This analysis highlights a critical vulnerability: the health of Nigeria’s aviation sector is intrinsically linked to financial stability, tourism, business connectivity, and national security. A grounded fleet would isolate regions, increase pressure on road networks, and stifle economic activity.
The Industry’s Plea and the Path Forward
Onyema revealed that the Airline Operators of Nigeria (AON) has repeatedly presented its case to the National Assembly and the presidential committee on tax reform, with officials reportedly “surprised” at the scale of the burden. The industry’s unified request is clear: reinstate the VAT exemptions and duty waivers of the 2020 Act to ensure survival.
While acknowledging President Bola Tinubu’s past responsiveness to sector concerns, the clock is ticking. The standoff presents the government with a stark choice: maintain a new revenue stream at the risk of collapsing a vital industry, or provide strategic fiscal support to sustain connectivity and economic growth.
Source & Attribution: This report is based on information originally reported by Persecondnews in an interview with Air Peace CEO Allen Onyema.