Nigeria’s New Aviation Tax Regime Threatens Domestic Connectivity and Industry Growth
The reintroduction of Value Added Tax (VAT) on airline tickets, aircraft, and spares in Nigeria has reignited debate over the country’s aviation tax policy, with local carriers warning that the mounting fiscal burden is pushing the sector toward a breaking point. Despite recent progress under the Minister of Aviation and Aerospace Development, the industry’s core complaint remains unchanged: multiple, overlapping taxes are stifling growth, shrinking route networks, and eroding Nigeria’s competitive edge in the African skies.
From January 2026, the government’s new tax laws have reversed a five-year exemption period, reinstating a 7.5% VAT on all domestic airline tickets, aircraft purchases, and spare parts. This is layered atop a 5% ticket sales charge, customs duties, and a host of other levies—creating a cumulative tax load that can exceed 12% on a single ticket. Airlines also face ground handling fees, navigational charges, and even taxes on inflight catering, all of which eat into already razor-thin margins. The result is a cost structure that many operators describe as unsustainable, especially when compared to the more supportive fiscal environments in peer African markets.
Industry data paints a stark picture. Domestic passenger volumes have dropped by 13.6% since 2022, falling from 14.5 million to just 12.5 million in 2024, even as Nigeria’s population and travel demand continue to rise. This decline is not due to waning interest in air travel—Nigerians want to fly, especially given the country’s vast distances and challenging road conditions—but rather to the suppression of demand by high ticket prices. Average fares have surged by nearly 20% year-on-year, with some last-minute tickets on key routes now exceeding N200,000. For every N350,000 ticket sold, airlines may retain as little as N81,000 after taxes and charges, leaving little room for reinvestment or fleet renewal.
The impact is visible across the sector. Route networks are shrinking, with airlines forced to cut marginal destinations and reduce frequencies to contain losses. Aircraft utilization has dropped, maintenance is often delayed due to customs bottlenecks, and staff face wage pressures. Some carriers have grounded aircraft entirely, unable to clear essential spares through customs despite valid waivers. The industry’s financial distress is compounded by the fact that foreign airlines—often operating under more favorable tax arrangements—now dominate over 90% of Nigeria’s international market, further eroding the local sector’s share and influence.
What makes Nigeria’s approach particularly contentious is its divergence from international aviation norms and best practices. The International Civil Aviation Organization (ICAO) and the International Air Transport Association (IATA) both recommend zero-rating or exempting aviation inputs from VAT, a policy widely adopted by regional peers such as Ethiopia, Kenya, and Rwanda. These countries have recognized that taxing aviation inputs suppresses demand, reduces connectivity, and ultimately shrinks the tax base—contradicting the very goal of revenue growth. In contrast, Nigeria’s current regime not only imposes VAT on tickets and spares but also suffers from inconsistent enforcement of customs waivers, leading to operational delays and increased risk for local operators.
Industry leaders are united in their call for urgent policy reform. Their demands are clear: reinstate the VAT exemption on airline tickets and aviation inputs, enforce customs waivers consistently to keep aircraft flying, and eliminate “tax-on-tax” loops where VAT is charged on top of other levies. They also urge the government to harmonize fiscal charges across federal, state, and airport authorities, streamlining the cost structure to support sustainable growth. The message is not a plea for handouts, but a push for an enabling environment that allows Nigerian aviation to thrive, compete, and contribute to broader economic development.
For Africa’s tourism and aviation professionals, Nigeria’s experience offers a cautionary tale about the risks of over-taxation in a capital-intensive, strategically vital sector. As the continent’s largest economy, Nigeria’s aviation policy choices have ripple effects across the region—impacting connectivity, investment, and the ability of African carriers to compete on a global stage. The coming months will be critical in determining whether the country can realign its fiscal approach to unlock the full potential of its skies, or whether the current the entire sector.
