Why Aviation Must Be Enabled to Grow Nigeria’s Revenue Base

Charles Grant

Aviation is not a luxury. It is a critical enabler of commerce, investment, tourism, and national integration. When aviation works, the economy moves faster.

Nigeria therefore faces an important policy choice. Do we treat aviation mainly as a source of immediate tax revenue, or do we position it to grow into a stronger and more reliable contributor to government finances over time?

The distinction matters because one simple truth applies. One cannot tax what does not survive. 

This is not an argument for special concessions. It is a case for getting the sequencing right. Growth must come before aggressive taxation.

A Sector Falling Behind Its Potential

Nigeria’s domestic passenger traffic declined by about 3 percent between 2022 and 2024, while comparable markets such as Egypt, Kenya, and South Africa recorded growth of between 10 and 15%. 

In a country of over 200 million people with strong mobility needs, this should concern us.

Demand for air travel has not disappeared. If anything, it continues to rise. Distances between our major cities are significant, road travel can be unpredictable, and businesses increasingly depend on speed and reliability.

However, when operating costs climb and multiple fiscal charges are layered onto tickets, fares inevitably rise. At some point, passengers begin to defer travel or look for alternatives. A sector that should be expanding then starts operating below its capacity.

When aviation slows, the effects reach far beyond the airlines. Tourism weakens, trade becomes less efficient, investment flows are affected, and job creation suffers.

Strong Demand, But Growing Value Leaving the Country

One of the more striking trends in West African aviation today is that Nigerian demand remains strong, yet an increasing share of the economic value tied to that demand is being captured by foreign carriers.

Regional airlines have successfully built networks around Nigerian traffic, benefiting from the associated jobs, maintenance activity, training spend, and foreign exchange flows. 

Competition is healthy and should be encouraged. But policy must ensure that Nigerian operators are not structurally disadvantaged in their own market. Otherwise, we risk creating a situation where the demand is local but the economic benefits increasingly sit elsewhere.

 The Cost Environment Matters

Airlines in Nigeria operate under a heavy stack of charges that include ticket sales charges, passenger service charges, VAT exposure, customs duties, navigational fees, and various regulatory levies. 

Individually, each may appear manageable. Together, they create significant pressure on margins.

Airlines cannot pass all these costs to passengers without weakening demand, yet absorbing them is equally unsustainable. Over time, networks shrink, aircraft utilization drops, and access to capital becomes more difficult.

Competitiveness is rarely lost overnight. More often, it is gradually eroded by an operating environment that becomes harder each year.

Policy Clarity Drives Investor Confidence

Aviation is a long-term business. Aircraft acquisitions, maintenance programs, and route development all require patient capital.

For investors, clarity and consistency in policy are not optional. They are fundamental.

Recent fiscal changes, including the reversal of VAT exemptions and uncertainty around what qualifies as taxable aviation inputs, have introduced avoidable risk into airline planning. Continued enforcement actions even where waivers exist further increase unpredictability. 

When the policy environment feels uncertain, capital naturally becomes more cautious.

Structural Pressure on Nigerian Airlines

Most airline revenues are earned in naira, while a large portion of costs such as aircraft leases, heavy maintenance, insurance, and spare parts are denominated in foreign currency. 

Add high domestic interest rates and constrained foreign exchange access, and the pressure becomes clear.

Even the most disciplined management teams cannot fully offset this imbalance through efficiency alone. Eventually, capacity tightens. Aircraft availability declines. Delays increase. Passenger confidence weakens.

What travellers experience operationally often begins as an economic constraint.

 Revenue Illusion

There is a natural assumption that higher taxes automatically translate into higher government revenue. Aviation often proves otherwise.

Global estimates show that while aviation taxes generate roughly 90 billion dollars each year, they suppress about 183 billion dollars in wider economic activity. 

As connectivity falls, fewer tickets are sold, less fuel is purchased, and the surrounding ecosystem that supports hospitality, logistics, and employment also contracts.

Growth expands the tax base. Contraction narrows it.

 True Cost of Airline Failure

When an airline shuts down, the consequences extend well beyond shareholders. Each grounded aircraft can represent about 100 direct jobs and up to 300 indirect roles across the value chain. 

Connectivity declines, suppliers lose business, skilled workers migrate, and rebuilding that capacity later becomes significantly more expensive than sustaining it in the first place.

Aviation capability, once lost, is not easily restored.

What Successful Aviation Economies Understand

Countries that have made aviation a priority tend to treat it as economic infrastructure rather than a luxury.

Strategic support in markets such as Ethiopia and Rwanda has helped expand connectivity, attract investment, and create employment. Research indicates that a 10 percent increase in air connectivity can raise foreign direct investment by 4.7 percent and lift GDP by about 0.5 percent. 

This is not about protectionism. It is about enabling competitivenes.

A Practical Path Forward

The objective is not to eliminate taxation. It is to create the conditions for sustainable revenue growth.

Restoring clarity around aviation input exemptions, enforcing customs waivers consistently, removing duplicative tax layers, harmonising charges across agencies, and establishing a coordinated national aviation growth framework would materially strengthen the sector. 

These steps are not simply industry requests. They are economic competitiveness measures.

 Fiscal Win for Nigeria

Lower structural costs support network expansion. Expanded networks stimulate passenger traffic. Increased traffic strengthens the tax base while supporting tourism, trade, logistics, and employment.

Countries that have followed this path did not lose revenue. They expanded it by unlocking economic activity at scale.

Nigeria has the market size, geographic position, and entrepreneurial depth required to become a leading aviation hub on the continent. Achieving that potential requires a deliberate shift from short-term revenue focus toward long-term sector growth.

The question is not whether aviation should contribute to public finances. It is how best to position the sector so that its contribution becomes larger, more stable, and more durable.

Enable aviation to survive today, and it will help finance Nigeria’s growth tomorrow.

•Grant is Chief Financial Officer of Aero Contractors and a finance executive specialising in airline economics, restructuring, and aviation policy.