The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, , has said the new tax laws recently approved by the Federal Government are designed to support Nigeria’s aviation industry, not damage it. Oyedele made the clarification in a public post addressing concerns raised by airline operators and commentators about the possible impact of the reforms on airline operations and ticket prices.
According to him, the government recognises the real challenges facing the aviation sector, especially the burden created by multiple taxes, levies and regulatory charges. He said the has engaged extensively with airline operators and that discussions with industry stakeholders are still ongoing. He stressed that claims suggesting the new tax laws will worsen the situation are not accurate.
Oyedele explained that one of the biggest cost drivers for airlines under the old tax system was the 10 percent withholding tax, WHT, imposed on aircraft leases. Under the previous law, this tax was non recoverable and significantly increased operating costs. He said the new tax laws have removed this fixed 10 percent rate and replaced it with a rate to be determined by regulation, creating room for either a full exemption or a much lower rate.
He gave an example to explain the impact, noting that on a 50 million dollar aircraft lease, an airline would previously pay 5 million dollars as WHT. According to him, eliminating this burden provides major structural relief for airlines and eases pressure on cash flow.
On value added tax, VAT, Oyedele said the temporary VAT suspension introduced in 2020 after COVID 19 appeared attractive but had hidden costs. Airlines were unable to recover input VAT on several items, including some assets, consumables and overheads, which meant VAT became embedded in their operating costs. Under the new tax laws, he said airlines will now be fully VAT neutral.
He explained that VAT paid on imported or locally sourced assets, consumables and services will be fully claimable. Where an airline records excess input VAT, the law mandates a refund within 30 days. This will be supported by a fully funded tax refund account and an option to offset VAT credits against other tax liabilities, a move he said will improve liquidity and reduce cost pressure.
Oyedele also addressed concerns about import duties, stating that existing exemptions on commercial aircraft, engines and spare parts remain unchanged. He said there is no reversal of these exemptions and no new burden introduced under the tax reforms.
On ticket prices, he noted that airline operations are generally low margin. He said a 7.5 percent VAT on tickets, within a system where input VAT is fully recoverable, will have a much lower net impact than many claims suggest. Even in a worst case scenario where VAT is not claimable, he said the maximum impact would still be 7.5 percent. He explained that a 125,000 naira ticket would rise to not more than 134,375 naira, while a 350,000 naira ticket would not exceed 376,250 naira.
The new law, according to Oyedele, also provides a framework to reduce corporate income tax, CIT, from 30 percent to 25 percent, a move expected to benefit airlines. 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.
He acknowledged that the issue of multiple levies and charges imposed on airlines and flight tickets is real, but said these were not created by the new tax laws. He added that government is working with operators and relevant agencies to achieve a lasting solution, noting that tax harmonisation under the new laws means conditions can only improve from 2026.
