Nigeria’s aviation sector faces a potential crisis as a sweeping new tax law set to take effect on January 1, 2026 risks pushing domestic airfares beyond ₦1 million, Air Peace’s Chairman and CEO, Allen Onyema, has warned.
The concerns, raised in a televised interview on ARISE NEWS, spotlight deepening tensions between government revenue policy and the survival of local airlines.
Aviation on the Brink?
Onyema described the industry as “choking” under multiple and overlapping taxes, levies and charges that significantly eat into airline revenues. According to him, in a typical ₦350,000 domestic ticket, airlines retain only about ₦81,000 after mandatory deductions — a fraction of the total fare.
Highlighting the looming impact of the new tax provisions, Onyema said the reintroduction of Value Added Tax (VAT), on aircraft purchases, spare parts and even ticket fares, which were exempt under the 2020 Finance Act, would dramatically increase operating costs.
He underscored the strain this places on airlines already grappling with high interest rates — up to 30–35% on borrowed funds — and argued that these costs will inevitably be passed on to passengers, culminating in economy-class fares hitting or exceeding ₦1 million.
Beyond Fares: Broader Economic Risks
Onyema’s warning extends beyond ticket prices. He cautioned that without urgent policy intervention, Nigeria’s domestic carriers could collapse within three months of full implementation — a scenario that would reverberate through the economy.
The repercussions, he explained, would include:
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Reduced connectivity – particularly on key domestic routes.
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Banking sector strain – given airlines’ heavy indebtedness.
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Job losses and fallout for aviation-linked businesses nationwide.
He stressed that the aviation sector, while competitive and cost-sensitive globally, should not be treated primarily as a revenue source for the government. Instead, it should operate under internationally-recognised norms such as those advised by the International Civil Aviation Organisation (ICAO), which promotes cost recovery rather than taxation as revenue generation.
Industry Frustration and Calls for Reform
Airline stakeholders, including the Airline Operators of Nigeria (AON), have reportedly presented detailed submissions to both the National Assembly and the tax reform committee, outlining the risks of the new tax structure. While officials acknowledged the data, operators say implementation remains a pressing threat.
Critics of the tax law argue that rolling back strategic exemptions — particularly the VAT and customs duty waivers that were part of the 2020 Finance Act — undermines progress made in reducing operational costs in an already challenging environment.
What This Means for the Average Nigerian Traveller
For everyday air travellers, the implications of these changes could be stark:
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Airfares on major domestic routes might more than double – placing air travel out of reach for many Nigerians.
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Reduced competition – if smaller carriers shut down, potentially leading to fewer flight options and higher fares in the long term.
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Pressure on alternative modes of transport – which are often slower, less safe, or less reliable.
While some industry voices stress that Nigerian domestic fares remain competitive when adjusted for global standards, the looming tax burden threatens to reverse these comparative advantages.
In summary:
The new tax law poised to take effect in early 2026 could dramatically reshape Nigeria’s aviation landscape.
With higher operational costs, reintroduced VAT and levies, limited revenue retention for airlines, industry leaders warn that ticket prices could skyrocket to around ₦1 million or more — a change that may have far-reaching consequences for consumers, airlines, and the broader economy unless policy adjustments are made.
