Nigeria's aviation industry is facing a severe threat of reduced economic output and massive job cuts following the federal government's planned tax reforms, experts have warned.
Experts Predict Sharp Decline in Output and Employment
Industry specialists have raised the alarm that the full implementation of the new tax framework, scheduled to commence on January 1, 2026, could trigger a drastic downturn. They project that aviation's contribution to the nation's Gross Domestic Product (GDP) could plummet by up to 20 percent. Furthermore, the sector, which currently provides 39,500 direct jobs, may witness a reduction in its workforce by as much as 30 percent.
While the reforms introduced by the current administration aim to increase government revenue, improve tax administration, and offer relief to some sectors, analysts argue it will have a damaging effect on aviation. They point out that the industry is already grappling with high operational costs, foreign exchange volatility, numerous existing charges, and weakened passenger spending power.
Detailed Projections from Industry Leaders
Capt. Ado Sanusi, the Managing Director of Aero Contractors, provided a detailed breakdown of the potential impact. He stated that without industry-specific waivers, the sector could see a 10–20 percent drop in its GDP contribution. Sanusi emphasized that aviation is already one of Nigeria's most heavily taxed sectors.
The new policy expands Value Added Tax (VAT) to cover aircraft parts, fuel, insurance, maintenance, and air tickets, which will inevitably raise costs and suppress demand. He warned that the direct financial contribution from airlines, which was $449.7 million in 2024, could fall by 10–25 percent starting in 2026.
"Smaller and newer airlines may struggle to survive and could exit the market or be forced into mergers," Sanusi added. He also projected a 10–30 percent reduction in direct aviation jobs, as operators would be forced to cut capacity, reduce routes, and delay fleet expansion. This would have a ripple effect on ground handlers, caterers, training schools, maintenance organizations, and airport concessionaires.
Call for Policy Review and International Treaty Concerns
Capt. Samuel Caulcrick, former Rector of the Nigerian College of Aviation Technology (NCAT), criticized the reintroduction of VAT on air transport as discriminatory. He noted that it adds to the existing 5 percent Ticket Sales Charge (TSC) and Cargo Sales Charge (CSC), pushing the total tax burden on passengers to 12.5 percent, while road, rail, and sea transport remain VAT-exempt.
Caulcrick warned that airlines would pass these higher costs to passengers, leading to increased fares, reduced demand, job losses, and weaker regional connectivity. He recommended suspending either the new VAT or the existing TSC/CSC before January 2026 and exempting safety-critical aircraft parts from VAT.
At a recent webinar, the International Air Transport Association (IATA) accused the Nigerian government of violating international agreements. Dr. Samson Fatokun, IATA's Area Manager for West and Central Africa, stated that Nigeria is contravening the December 2024 ECOWAS Treaty and International Civil Aviation Organisation (ICAO) conventions, which prohibit or discourage taxes on air passengers and cargo.
Both experts and industry bodies are urging the government to consider targeted incentives to stabilize the sector. Their recommendations include:
- Tax credits for airlines.
- Reduced VAT rates on air tickets.
- Import-duty waivers on aircraft parts and maintenance components.
Aviation analyst Adeola Araba echoed these concerns, predicting a short-term drop of up to 20 percent in airlines' direct financial contribution. He cautioned that without urgent government intervention, the aviation sector could face its most difficult period since the COVID-19 pandemic, undermining its vital role in supporting trade, investment, and regional integration.
