Airfares to Rise as FG Ends Airline Tax Breaks from 2026

The Federal Government has abolished the Value Added Tax (VAT) and duty exemptions previously enjoyed by airlines, announcing that, from January 1, 2026, commercial aircraft, engines, spare parts, and flight tickets will once again be subject to VAT and import duties. The landmark policy shift is set to reshape Nigeria’s aviation industry, with ripple effects on operators, supply chains, and passengers.

The announcement came during a Business Webinar on Thursday, jointly hosted by Aviation & Allied Business in collaboration with the Nigeria Revenue Service (formerly FIRS), under the theme: “Nigeria Tax Act (2025) & The Aviation Industry: Aviation Sector Enlightenment Initiative.”

Assistant Director of the Nigeria Revenue Service, Mrs. Nkechi Umegakwe, said the directive is backed by the 2025 Tax Reforms Act and will be enforced comprehensively.

“Unlike what is currently obtainable, it will become mandatory from January next year for airline operators and other aviation companies to pay VAT on all services and operations,” Umegakwe explained.

For years, airlines were exempted from paying import duties and VAT on aircraft, spare parts, and tickets, a measure introduced to reduce costs and encourage growth in the sector. With the new law, however, the tax reliefs will be scrapped, placing the industry squarely under the nation’s tax net.

Industry Reactions: Rising Costs Ahead

The policy has drawn mixed reactions from stakeholders.

A senior executive of a domestic airline, speaking anonymously, described the development as a fresh burden on an already struggling industry.

“This is a blow to an industry battling forex instability, high fuel prices, and shrinking margins. The obvious outcome will be higher ticket prices, and passengers will feel the pinch.”

The Airline Operators of Nigeria (AON) cautioned that the move could “erode competitiveness” and drive up the cost of doing business, especially for smaller carriers.

Conversely, some freight forwarders and logistics providers believe the policy could help curb tax loopholes and encourage greater transparency in pricing structures.

Expert Perspectives: Balancing Revenue and Sustainability

Economists see the move as part of the government’s broader effort to strengthen fiscal discipline and diversify revenue streams.

An aviation economist, argued that while the change was inevitable, its impact must be carefully managed.

“Tax exemptions were never designed to be indefinite. But the government must balance its revenue drive with measures that ensure airlines remain viable and air travel accessible.”

Civil society groups voiced concerns that the tax reintroduction could make air travel increasingly elitist. The Civil Society Aviation Watch (CSAW) warned in a statement:

“Without safeguards, this policy risks pricing ordinary Nigerians out of the skies. Air travel is not a luxury; it is an enabler of economic and social development.”

Government’s Position: Necessary Revenue Reform

The Federal Government has defended the decision, saying the exemptions had become outdated and unsustainable. Officials argue that the policy aligns with the broader goals of the 2025 Tax Reforms Act, which seeks to expand the tax base, reduce fiscal leakages, and increase non-oil revenue.

What This Means for Passengers

For passengers, the scrapping of VAT exemptions could mean steeper ticket prices starting in 2026. Airlines, already squeezed by high operating costs, are expected to pass some of the new tax burden onto travelers.

Travel analysts predict that domestic ticket prices could rise by 10–15% in the first year of implementation, while international fares may also adjust upward. For frequent flyers and businesses reliant on air transport, the policy could translate into higher travel budgets.

Still, experts say the final impact will depend on how airlines adapt. Some may absorb part of the costs to remain competitive, while others may re-strategize by offering tiered pricing, cutting non-essential services, or investing in efficiency.

For everyday travelers, however, the reality is clear: flying in Nigeria is set to become more expensive from January 2026.