Airfares in Nigeria are set to rise further from January 1, 2026, when the new Tax Act, which imposes import duties and Value Added Tax (VAT) on aircraft, aircraft parts and airline tickets, becomes operational.
The Act stipulates that local airlines will begin paying import duties and VAT on commercial aircraft imports, commercial aircraft engines, spare parts, and air tickets.
Industry stakeholders warn that these new levies will increase airlines’ operational costs, a burden likely to be passed on to passengers through higher ticket prices.
The new tax reform Act, published by the federal government in an official gazette, among other provisions, also allows taxpayers to settle levies arising from foreign currency transactions in naira using the prevailing exchange rate in the official foreign exchange market.
LEADERSHIP Friday reports that the new Tax Reforms Act would come into effect in 2026, and Airline Operators of Nigeria (AON) had warned it would collapse the nation’s aviation sector.
AON vice president Dr Allen Onyema said that if implemented, the Tax Reform Act will collapse local airline businesses in 48 hours.
According to him, Nigerian airlines are already overtaxed and adding additional taxes will cause the industry to collapse.
“I don’t know who put the clause in the tax reform that airlines should start paying Customs duty and 7.5 per cent Value Added Tax (VAT) on imported aircraft, spare parts and even airfares,” Onyema said.
However, speaking on Thursday at a Business Webinar jointly organised by Aviation & Allied Business in collaboration with the Federal Inland Revenue Service (FIRS), with the theme: ‘Nigeria Tax Act (2025) & The Aviation Industry: Aviation Sector Enlightenment Initiative,’ the federal government declared that there is no going back on the full implementation of the new Tax Reforms Act from January 1, 2026
In her presentation, the assistant director of the Nigeria Revenue Service (formerly FIRS), Nkechi Umegakwe, said that the government had done all due diligence before developing the new tax laws.
Umegakwe, the lead presenter at the event, insisted that airline operators, including other allied businesses in the aviation sector, must now pay VAT on all of their services and operations.
Currently, airlines are exempt from paying import duties and VAT on the importation of commercial aircraft, commercial aircraft engines, spare parts, and air tickets.
She insisted that all the above are now liable to VAT from January 1, 2026.
According to her, the new tax reforms were geared towards increased revenue generation for the federal government, business cost reduction via VAT recovery, improved cash flow for businesses, and stronger compliance via digital invoicing and tracking.
Umegakwe expressed that the new tax reforms have harmonised various taxes to create a unified system that eliminates inconsistencies and drives efficiency while simplifying the current tax laws.
She said, “VAT is a consumption tax on goods and services to be borne by the end users and not the suppliers. Once the new tax reforms become operational, you must pay VAT on whatever you bring in as an airline – aircraft, engines, spare parts, and others.
“However, if the taxes are in essence, the airlines can ask for a refund, which would be done within 30 days of request. But, with the new tax reforms, airlines will no longer be exempt from VAT payment.”
New taxes in breach of international treaties
The area manager, West and Central Africa, IATA, Dr. Samson Fatokun, in his contribution as a panel member, criticised the government for inconsistencies.
In his presentation, Fatokun said that the airlines and other operators in the sector were already overburdened with numerous levies and charges, and he wondered why the government was bent on adding to the current challenges in the sector.
Fatokun mentioned the payment of a five per cent Ticket Sales Charge/Cargo Sales Charge (TSC/CSC) by the airlines as one of the levies they were currently battling.
He maintained that the five per cent TSC/CSC inflated the price of air tickets and scared away some potential air passengers from the sector.
He recalled that President Bola Tinubu had, in December 2024, as the chairman of ECOWAS, signed a treaty with other member nations, which prohibited taxes on air passengers and cargo.
The new treaty would take effect from January 1, 2026.
Apart from this, he also said that Nigeria, as “a full member” of the International Civil Aviation Organisation (ICAO), signed a treaty which prohibited payment of VAT on air transportation, reiterating that the aviation industry is cost recovery, not revenue generation.
“Aviation is a global business; there are treaties signed to regulate the global industry. Nigeria, as a member of ICAO, is subject to the recommendations and regulations of the organisation.
“The Nigerian tax authority needs to be aware of international treaties Nigeria entered into with various countries. As it is, we are contravening the treaties we already entered into with the return of VAT for airlines,” he said.
Also speaking, aviation expert, Capt. Samuel Caulcrik said that the various taxes and levies in the sector were already choking the operators and slowing down the growth of the business.
He argued that the payment of 7.5 per cent VAT and TSC/CSC by the airlines would amount to multiple taxation on the industry and called on the government to rescind its decision.
Caulcrik further posited that all the money being spent on the sector comes from air passengers and shippers, noting that any additional tax would kill the industry.
He added: “This will cut down the number of air travellers coming into the industry. If some of the passengers had been cut off due to five per cent TSC/CSC, an additional 7.5 per cent from VAT will chase away more people from the industry and deplete performance.”
On her part, the managing director of Pathfinder Securities, Nkechi Onyenso, canvassed further engagements by the federal government and aviation business stakeholders.
According to her, the paucity of foreign exchange, multiple taxation, and other levies generally negatively impact the aviation industry.
She, however, said that the new Tax Reforms Act has its own advantages, but insisted there is room for more engagement.
Signed into law on June 26, 2025, the reforms are contained in four legislations: the Nigeria Tax Act, 2025 (NTA); Nigeria Tax Administration Act, 2025 (NTAA); Nigeria Revenue Service (Establishment) Act, 2025 (NRSEA) and Joint Revenue Board (Establishment) Act, 2025 (JRBEA).
The NTA and NTAA will take effect from January 1, 2026, while the NRSEA and JRBEA will commence on June 26, 2025, to allow for preparatory work ahead of full implementation.
What that means is that the official implementation of the rebranding of the Federal Inland Revenue Service (FIRS) to the Nigeria Revenue Service (NRS or the Service) as a centralised body for tax administration in Nigeria will take effect from June next year.
What the new tax laws say
Among the landmark provisions, the NTAA grants small companies—defined as businesses with annual turnover not exceeding N100 million and fixed assets below N250 million—complete tax exemption.
A look into the new Act shows that large companies also stand to benefit from a proposed reduction of corporate income tax from 30 percent to 25 percent, subject to a presidential order that would be issued on the advice of the National Economic Council.
For top-up taxes, the law sets a high exemption threshold: N50 billion in revenue for local firms and €750 million (or its equivalent) for multinational corporations.
Investors in priority economic sectors will also enjoy a tax credit of 5 percent per annum to encourage capital inflows and accelerate economic diversification.
Government officials have described the reforms as a bold step toward simplifying Nigeria’s tax regime, stimulating business growth, and boosting revenue mobilization.
Speaking earlier this year on the direction of fiscal reforms, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, said the government’s aim was to “modernise tax administration, reduce the burden on small businesses, and create a more competitive environment for large corporates, while ensuring revenue adequacy to fund development priorities.”
Mr. Edun had also announced that the controversial 5 percent fuel surcharge, often described as a fuel tax, will not be enforced immediately.
Tax experts have also said that the provision allowing naira payment for foreign currency-linked taxes could ease compliance pressures on businesses, while also supporting exchange rate stability.
The government believes that the measure would reduce the dollarisation of the economy and promote confidence in the domestic currency.
The new tax framework signals a shift toward balancing revenue generation with economic competitiveness, in line with President Bola Tinubu’s broader reforms to reposition Nigeria’s economy for sustainable growth.
