Implementation Of Tax Reform Act Could Cripple Domestic Airlines –Operators

Indigenous airline operators have cautioned that implementing the newly signed Nigerian Tax Reform Act 2025 could cause their operations to collapse within 48 hours.

The vice president of Airline Operators of Nigeria (AON), Dr. Allen Onyema, warned that the Act’s provisions—particularly the introduction of Customs duty and a 7.5 per cent Value Added Tax (VAT) on imported aircraft, spare parts, and even airfares—would be catastrophic for the already overtaxed local airlines.

Speaking on Thursday at the ongoing 29th Annual Conference organised by the League of Airport and Aviation Correspondents (LAAC), Onyema said, “I don’t know who put the clause in the tax reform that says airlines should start paying Customs duty and 7.5 per cent Value Added Tax (VAT) on imported aircraft, spare parts, and even airfares.

“The airlines will die within 48 hours if this should happen. They will die because this is never done anywhere in the world,” he stated.

He stressed that such taxation was unprecedented globally and would cause airline businesses to fail almost immediately.

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Industry stakeholders have emphasised that fully enacting this law without specific waivers would devastate the fragile Nigerian aviation sector, cause massive job losses and potentially raise social instability. Operators argued that reintroducing VAT on air transport contradicted the International Civil Aviation Organisation (ICAO) standards, which generally oppose VAT on air services, worsening operational costs.

Also speaking at the conference, which was themed “Financing Aviation in Nigeria: Risks, Opportunities and Prospects,” the managing director of Financial Derivatives Company Ltd, Bismarck Rewane, asked the federal government not to renovate or reconstruct airports that would be concessioned or privatised.
LEADERSHIP reports that the Federal Executive Council (FEC) last Thursday in Abuja approved N712 billion for the complete rehabilitation, upgrade, and modernisation of MMIA.

The approval was the centerpiece of a sweeping N900 billion aviation infrastructure plans for the country.
The minister of Aviation and Aerospace Development, Festus Keyamo, said the project, awarded to China Civil Engineering Construction Corporation (CCECC), would strip the old terminal down to its structural core before rebuilding it with new mechanical, electrical, and plumbing systems.

Rewane said the federal government should not reconstruct an airport that would soon be concessioned.

Rewane, who presented a paper on ‘Unlocking Investment Opportunities in Nigeria’s Aviation Sector: The Role of Financial Institutions,” said the new owners should be the ones to renovate or reconstruct the airport and not the government.

“Concession and Public Private Partnership should be prioritised for airport upgrades to aid national fiscal sustainability and avoid inefficient operations.”

The renowned economist said the Nigerian Aviation sector urgently needs consolidation and urged the government to focus on policy and regulation.

The CEO of Financial Derivatives Company expressed concerns that Nigeria continued to spend billions on airport operations as air traffic was declining.

According to him, MMIA Lagos (Nigeria) processes 6.5 million passengers annually and spends 1.75bn dollars to run the airport; Los Angeles Intl (USA) processes 76.5 million passengers and spends 3.5 billion dollars; Heathrow (UK) processes 83.9 million passengers and spends 15.6 billion dollars; Chicago O’Hare Intl (USA) processes 58 million passengers and spends N4.5 billion dollars; Dubai Intl (UAE) processes 92 million passengers and spends 4.0 billion dollars.

“We need firm and effective regulation for safety; concessions and PPPs should be prioritised for airport upgrades to aid national fiscal sustainability and avoid inefficient operations. There should be investment in local maintenance, repair & overhaul hubs.

“Government should focus on policy and regulation, not running airlines or building airports directly, and policy consistency is crucial for rebuilding trust with global investors and attracting global aviation capital,” he recommended.