The clarification follows comments made by Air Peace Chairman and CEO, Allen Onyema, during a Sunday interview on Arise News, where he warned that provisions of the Nigeria Tax Act and related fiscal policies scheduled to take effect in January 2026 could significantly raise airfares. Onyema argued that the reintroduction of a 7.5 per cent Value Added Tax (VAT) on aircraft imports, engines and spare parts—previously suspended in 2020 during the COVID-19 crisis—could push domestic economy fares from about N350,000 to as high as N1.7 million.
In a statement posted on X on Monday, Oyedele acknowledged the long-standing difficulties confronting the aviation sector, including multiple taxes, levies and regulatory charges. He noted that the reform committee has held extensive engagements with airline operators and industry stakeholders. However, he maintained that claims linking the new tax laws to a sharp rise in operating costs and ticket prices are misplaced.
According to him, the reforms are aimed at resolving structural issues that have historically driven up costs in the sector. “Contrary to the claim that the new tax laws will hurt the industry, the reform is part of the solution, not the source of the problem,” Oyedele said, adding that several problematic tax provisions have either been removed or restructured under the new framework.
Key Changes Affecting the Aviation Sector
Oyedele highlighted a number of provisions in the new tax laws that he said would deliver tangible relief to airlines.
One of the most significant changes is the removal of the 10 per cent withholding tax (WHT) on aircraft leases, which has been one of the heaviest tax burdens on Nigerian airlines. Under the existing regime, the tax is non-recoverable and directly increases operating costs. The new law eliminates this fixed rate and replaces it with a regulation-based approach, creating room for either a full exemption or a substantially lower rate.
To illustrate the impact, Oyedele noted that an airline leasing a $50 million aircraft currently pays about $5 million in withholding tax—an expense that directly strains cash flow. Eliminating or reducing this charge, he said, represents a major structural relief for the industry.
VAT: From Embedded Cost to Neutral System
On the contentious issue of VAT, Oyedele explained that while the VAT suspension introduced in 2020 appeared beneficial, it carried hidden disadvantages. Airlines were unable to recover input VAT on non-exempt items such as consumables, certain assets and overheads, effectively embedding VAT into their cost structures.
Under the new tax laws, airlines are expected to become fully VAT-neutral. VAT paid on imported or locally sourced assets, services and consumables will be claimable, while excess input VAT must be refunded within 30 days. The framework also provides for a fully funded tax refund account and allows VAT credits to be offset against other tax liabilities—measures aimed at easing liquidity pressures.
No New Import Duty Burden
Oyedele further clarified that existing import duty exemptions on commercial aircraft, engines and spare parts remain intact. He stressed that there is no reversal of these exemptions and no new import-related burden introduced by the tax reforms.
Limited Impact on Ticket Prices
Addressing fears of runaway ticket prices, Oyedele argued that the actual effect of VAT on fares would be far lower than suggested. Airline operations, he said, are typically low-margin, and a 7.5 per cent VAT on tickets within a system where input VAT is recoverable results in a much smaller net impact.
Even in a worst-case scenario where VAT were not recoverable, the maximum increase would still be limited to 7.5 per cent. By this logic, a N125,000 ticket would rise to about N134,375, while a N350,000 ticket would not exceed N376,250—far below the figures being circulated.
Corporate Tax Relief and Levy Harmonisation
The reforms also introduce potential relief on the corporate tax front. The new law provides a framework to reduce corporate income tax from 30 per cent to 25 per cent, a move that would benefit airlines and other capital-intensive businesses.
In addition, several profit-based levies—such as Tertiary Education Tax, NASENI, NITDA and Police levies—have been harmonised into a single Development Levy, reducing complexity and improving certainty for operators.
Multiple Charges Still a Challenge
Oyedele acknowledged that the aviation industry continues to grapple with a multiplicity of levies and charges imposed by various agencies. However, he emphasised that these charges are not created by the new tax laws and should not be attributed to the reform agenda. He added that the government is actively working with operators and relevant agencies to develop lasting solutions, noting that the harmonisation provisions in the new laws mean conditions should improve, not deteriorate, from 2026.
The statement concluded that the new tax regime provides a clearer legal and policy framework to tackle long-standing inefficiencies, reduce operating costs and limit the impact on passengers. Oyedele urged industry stakeholders to prioritise constructive engagement and detailed understanding of the reforms, rather than relying on what he described as unsubstantiated claims.