NIGERIA’S aviation sector is struggling under a 35% tax burden on local airlines, which stakeholders claim stifles growth and competitiveness against foreign carriers.
The Centre for the Promotion of Private Enterprise (CPPE) has decried the excessive costs imposed by aviation agencies, warning they jeopardize the sustainability of domestic airlines. It noted that a significant portion of every fare, approximately 35% of N350,000 for a domestic flight, is lost to taxes and fees before reaching the airline.
The CPPE specifically pointed to the Nigerian Civil Aviation Authority (NCAA), the Federal Airports Authority of Nigeria (FAAN), and the Nigerian Airspace Management Agency (NAMA) as responsible for this disproportionate fee structure.
“Industry estimates suggest that these charges collectively account for as much as 35 per cent of airline revenues, a level that is clearly incompatible with the thin margins typical of the aviation business,” Muda Yusuf, Chief Executive Officer, CPPE said.
The CPPE highlights numerous charges impacting airlines, including ticket sales, cargo fees, and landing charges, which accumulate before airlines profit. They acknowledged a 30% relief on statutory debts, particularly for FAAN and NAMA fees from the Tinubu administration, aimed at alleviating the Jet A1 fuel crisis, though Yusuf noted the relief’s limitations.
“While the debt discount offers short-term respite, it does not address the deeper structural cost challenges confronting the aviation sector… Government support for the aviation sector must therefore go beyond debt relief,” he said.
Yusuf cautioned that a complicated tax system compromises financial stability and safety, as struggling operators may cut corners. His solution is to simplify charges, allowing airlines to reduce fares instead of increasing them.
If CPPE provided the macro number, Air Peace furnished the receipts. Chairman anf CEO Allen Onyema has publicly indicated through recent interviews that the actual impact might be greater than CPPE’s estimate.
“Take a ticket of about N350,000. What comes to the airline is about N81,000,” Onyema said.
Onyema highlights that 23% is retained by the carrier before covering costs such as fuel, maintenance, financing, and salaries. He targets the NCAA’s 5% Ticket Sales Charge (TSC), arguing it is charged to the airline regardless of its regulatory framing.
“The truth we have to tell the President is that the 5 per cent passenger TSC charges belong to the airlines. And they will tell you that it’s the passengers that pay it. We refuse to accept that. If I charge N100,000, NCAA will take 5 per cent. If I charge N200,000, NCAA will take 5 per cent of 200,000. I did not set up business with you,” he noted.
Onyema estimates total revenue leakage to exceed CPPE’s 35 percent figure when examining the full revenue line instead of focusing on a single ticket.
“Almost 65 to 70 per cent of revenue does not go to airlines, it goes to taxes and levies. Yet airlines are blamed as if they are profiteering,” he said.
He has requested that the NCAA collect its 5% directly from airport passengers, rather than from airline fares, presenting this change as a structural fix rather than a subsidy.
“Nigerian airlines are heavily overburdened by taxes, levies, and all manner of charges… The government has got to look into the excessive multiple taxation. We’re suffering multiple taxation and multiple charges,” Onyema said.
Onyema highlighted that regulators should focus on cost recovery rather than profit generation from ticket sales, referencing ICAO’s guidance. He criticized the NCAA for contributing significantly to the treasury, pointing out that airlines bear the brunt of this policy.
Nigerian airline operator Onyema highlights significant financial challenges faced by local carriers, noting that borrowing costs range between 29-33% compared to 4% for Western airlines, while operational fuel costs have soared due to international conflicts.
He advocates for the establishment of an Aviation Taxes and Charges Review Committee to reassess the fee structures impacting airlines.
The Nigerian Civil Aviation Authority (NCAA) disputes Onyema’s claims regarding airfares, attributing price increases to market demand rather than taxes.
Governance analyst Joe Abah points to systemic issues, indicating that all stakeholders benefit from high fares at the expense of consumers.
Current reports reveal a staggering 54 separate taxes and charges on Nigerian airfares, contributing to the exorbitant prices.
Aviation analyst Chris Amokwu suggests that 30-40% of ticket revenue is consumed by taxes, with another 40% allocated to fuel, leaving minimal profit margins for airlines.
The NCAA’s flat Ticket Sales Charge and other regulatory fees compound these burdens. Ultimately, calls for structural reform emphasize the need for a more equitable fee system, especially in light of potential new taxes significantly impacting fares.