Despite the gains recorded in the country’s aviation sector under the Minister of Aviation and Aerospace Development, Mr Festus Keyamo, concerns over multiple taxations have remained.
Throughout 2025, domestic airline operators repeatedly urged Federal Government to reduce the taxes, warning that they were not only choking but could force some airlines to shut down operations.
That was even before the New Tax Laws, which took effect on January 1, 2026, were enacted.
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Although the Presidential Fiscal Policy and Tax Reforms Committee through its Chairman, Mr Taiwo Oyedele, has since said the new tax laws will help, not hurt domestic airlines, Saturday Vanguard has identified reasons taxation has become an incurable headache for local operators.
The insights were presented by Chief Financial Officer of Aero Contractors, Charles Grant, during a recent Civil Aviation Cost Recovery and Revenue Optimisation Stakeholders’ Retreat in Lagos.
Struggle
In the 3,375 words presentation, Grant stated that “aviation is not just another revenue line. It’s a complex, capital-intensive sector that connects people, moves goods, drives tourism, enables investment, and ultimately grows the economy. But in Nigeria today, we are seeing a different approach.
“One where we try to tax more, while supporting less. The outcome? Airlines are struggling. Routes are shrinking. Passenger volumes are down. And ironically, the tax base we are trying to grow is getting smaller. My appeal is not about avoiding tax. It’s about growing the pie first, so we all get more in the long run. Because in aviation, just like in agriculture or power, you cannot extract what you haven’t enabled.”
Passenger volumes
He said: “Here is what the numbers are telling us, Nigeria’s domestic passenger volumes have declined by about three per cent since 2022. It may not sound dramatic, but in a country with over 200 million people and rising travel demand, that signals a sector that’s underperforming its potential. This isn’t about demand drying up. It’s about demand being suppressed. Nigerians want to fly. Our cities are far apart. The roads are long, and in many cases, unsafe.
“Aviation should be expanding. But when ticket prices surge, fiscal charges multiply, and airline costs keep rising, passengers are priced out–or pushed out. Now contrast that with what we’re seeing in peer countries like Kenya, Egypt, and South Africa, each showing consistent growth in domestic traffic. Flat performance in a rising market is a red flag. The issue isn’t demand. It’s a misalignment between aviation realities and how fiscal policy is being applied. We’re seeing fragmented decisions, limited coordination, and policies that weren’t built with airline economics in mind. If that continues, we won’t just lose passengers. We’ll lose jobs, tax potential, and our place in the region’s aviation future. Because when aviation stalls, so does broader economic momentum.”
Fiscal charges
According to him, “there’s a long list of fiscal charges, ticket sales charge, TSC, passenger service charge, VAT, Pay-As-You-Earn, ground handling charges, overflight charges, navigational charges, customs duties, even catering and inflight services attract levies.
These aren’t isolated costs. They stack on top of one another, eating into already-thin margins.
“The result? Airlines can’t fully pass these costs on to passengers without sacrificing demand. So, they absorb the difference to the best of their abilities. Route networks shrink. Aircraft utilisation falls. Maintenance gets delayed. Staff go unpaid. It becomes a vicious cycle. And while local carriers bend under the weight, foreign airlines operate under different terms, often with diplomatic leverage and tax arrangements that give them a cost advantage. The playing field isn’t just uneven, it’s tilted against the local operator.
If we want Nigerian airlines to survive–let alone compete–we have to rewire the cost architecture.”
New Tax Laws
The Chief Financial Officer stated: “First, the zero-VAT status for international travel is gone. That alone makes Nigerian carriers less competitive, and it contradicts what most aviation-forward countries are doing.
Second, the Act (now law) uses vague language around what counts as a taxable supply. Without clarity, airlines are left guessing: will leases now attract VAT? Spares? Maintenance contracts? Uncertainty like this creates risk, and risk drives up cost.
But perhaps more frustratingly, we are still seeing Customs delays and enforcement actions, even where valid waivers exist. Operators spend weeks trying to clear critical parts–often at AOG status–because field officers disregard the waiver or interpret it inconsistently.
“Operators face a plethora of charges all layered on the same ticket. Some federal, some state, some agency-specific. It’s fragmented, duplicative, and regressive.
Reintroducing VAT
“The reintroduction of Value Added Tax, VAT, on airline tickets, spares and aircraft is a clear step backwards. It contradicts global aviation norms. International Civil Aviation Organisation Doc 8632 and International Air Transport Association both recommend zero-rating aviation inputs. And our regional peers–Ethiopia, Kenya, Rwanda–have all exempted these costs.
“VAT on aviation is not just a financial burden. It sends the wrong signal to investors, passengers, and partners. It shrinks demand, slows growth, and widens our competitive gap. ICAO and Airports Council International caution that taxes uniquely imposed on aviation reduce national welfare by making travel costlier, shrinking volumes, and ultimately collecting less revenue than expected.
Fiscal illusion
“There’s a fiscal illusion we need to confront–the idea that more taxes on aviation will automatically result in more government revenue.
But in practice, it does the opposite. When we increase taxes and charges in a high-cost environment, airlines respond by cutting routes, reducing frequency, or grounding aircraft altogether.
As traffic shrinks, so does the revenue base: fewer tickets sold, less VAT, less fuel uplifted, fewer handling jobs, less catering. The entire ecosystem contracts.
And who steps in? Foreign carriers. They fill the demand–but they’re not taxed the same way. Worse, they repatriate their earnings, so the fiscal benefit leaks out of the system. You don’t tax a struggling engine into high performance. You fuel it.”
Customs waiver non-implementation
“The intent behind Customs waivers for aircraft parts is sound–support safety, reduce cost pressure, and keep aircraft flying. But in practice, it’s not working. Airlines still face weeks of delays getting essential spares cleared. Even items with valid waivers are held up due to policy ambiguity or arbitrary charges. The result? Aircraft on ground–literally–waiting for a part stuck at the port. Schedule disruptions. Revenue loss. Strained passenger confidence. And on rare occasions, risky decisions under pressure. Worse, the cash flow impact is brutal. Airlines are forced to pay duties up front, then chase refunds later–tying up scarce working capital.
International norms
“Nigeria’s current fiscal posture towards aviation is not just burdensome, it’s also out of step with global aviation tax norms. Under ICAO guidelines, member states are expected to avoid taxing air transport inputs in a way that distorts access or discourages growth. That’s why in most aviation ecosystems, inputs like spare parts, maintenance, and fuel are zero-rated. When we violate this principle, we are not just hurting our carriers–we’re risking trade parity and bilateral reciprocity. If Nigeria wants to lead in aviation, we must realign. That means zero-rating aviation inputs, enforcing waivers, and removing the fiscal drag that is stifling growth and eroding our competitiveness.
Demands
“We are not here asking for handouts. We are asking for policies that enable Nigerian aviation to thrive. First, reintroduce the VAT exemption that airlines previously enjoyed. This was never a loophole–it was a strategic lever to keep fares affordable and airlines viable. Second, enforce Customs waivers consistently, especially for aircraft parts and AOG spares. Today, delays and inconsistent application are grounding aircraft that should be flying. Third, eliminate tax-on-tax loops, where VAT is charged on ticket sales tax and other levies. This compounds costs and inflates fares without improving revenue. Streamline Fiscal Charges across tiers of government. The layering of federal, state, and airport authority charges needs harmonisation.”
