Aviation Sector and Burden of Over-taxation

Chinedu Eze

One of the issues discussed during the Nigerian Aircraft Acquisition and Investment Summit (NAAIS), which held last week in Lagos, was over-taxation and its negative influence on the aviation sector.

Two other issues brought to the fore included; the low capacity of African airlines and the challenges of airport infrastructure on the African continent.

The summit attracted global aviation experts, aircraft manufacturers, lessors, financiers, suppliers, insurers and other stakeholders.

The experts left their marks with the signing of deals and commitment of lessors who have promised to adopt compliant strategy in dealing with Nigerian carriers. This is because the federal government has shown enough commitment in the protection of leased equipment, and has given assurance that the lessor must have their equipment back, should Nigerian carrier reneges in the leasing agreement.

The Director General of World Trade Organization (WTO), Dr. Ngozi Okonjo-Iweala, said the potential for growth of air transport in Africa remained huge but stymied by over taxation of the sector.

She noted that the abundant opportunities in the aviation industry in Africa, could lead to the maximisation of the contributions of the sector in the economic development of the region, if well harnessed. She however said this could happen only if existing constraints were removed.

Okonjo-Iweala regretted that African airlines were earning less than expected in global average in terms of traffic and revenue and urged governments to support infrastructure investments in underlying ecosystem, sustained airport infrastructure, air navigation services and other essentials.

Part of the support is reviewing downwards the high taxation of the industry by government and its agencies.

“Governments must maintain a fair and predictable tax regime and remove bilateral restrictions to enable African airlines fly,” she said, adding that when government gets it right, connectivity will grow and airfares will drop.

Speaking about Nigeria, the Director General said: “The aspiration of transforming Nigeria into a high value trading economy and a gateway between West Africa and global market cannot be achieved without investing in the underlying aviation ecosystem.”

She further said that existing airlines needed to upgrade their fleet to scale up competitiveness. According to her, aviation does not move bulk commodities but moves most sensitive goods and “when air cargo functions well, it does not only complement trade. It enables it.”

She therefore advised the federal government to call for private sector participation in aviation development and growth.

“The good news is that the burden needs not be borne by government alone. This calls for public-government partnerships. Private financing needs to be mobilised for modernisation of airport infrastructure,” Okonjo-Iweala said.

She also called for a review of rising fuel, taxes, and airport charges, which, according to her, can lead to higher operating costs for airlines.

“The fuel costs need to be re-examined – fuel costs, airport taxes, levies and charges”, she stated.

These, she said impede growth in the industry and urged that enabling business environment needs to be created to boost investors’ confidence in the sector.

“The model is straightforward – government provides the enabling framework, the regulatory certainty, and the long-term concession structures that give the private sector the confidence to commit. The private sector brings capital, operational expertise, and the discipline of commercial incentives. Once these structures are set, there is no reason it will not bring commercial growth as experienced in other parts of the world.

“Once these structures are set, there is no reason it will not bring commercial growth as experienced in other parts of the world,” Okonjo-Iweala further said.

At the NAAIS summit, the Director General of the Nigeria Civil Aviation Authority (NCAA), Captain Chris Najomo also spoke about the need to bring private sector to invest in aviation development. According to him, for this to happen, government must have strong regulator and the rules of engagement must be clear.

Najomo stated that Public-Private Partnerships (PPPs), were not just financing tools, but engines of efficiency, innovation, and risk-sharing.

“PPPs enable modernization of airport infrastructure, improve operational efficiency, enhance passenger experience and access to global best practices and technology,” Najomo said.

Najomo added that Nigeria’s growing population, expanded middle class, and increased regional connectivity, made the aviation market one of the most attractive in Africa.

“However, capital follows confidence, and confidence follows clarity, consistency, and credibility. No investor commits capital into an environment where rules are unclear or inconsistently applied. Regulatory certainty must therefore be our priority. This means clear legal frameworks governing PPP concessions, transparent procurement processes, consistent enforcement of contracts, and independence and professionalism of regulatory bodies. The Infrastructure Concession Regulatory Commission (ICRC) has been at the forefront of championing this course,” he said.

Speaking about the poor capacity of African airlines, the Chief Executive Officer of the Airlines Association of Southern Africa (AASA), Aaron Munetsi, in his presentation, said the poor fleet size of most Africans airlines was responsible for the loss of the African market to international carriers.

He frowned at the fact that European, American and Middle East carriers dominate the African market by 82 per cent and processed most of the 273 million passengers airlifted on the continent in 2025.

Munetsi expressed his dissatisfaction with the slow pace of aircraft acquisition and fleet size of African airlines put together.

Comparing African continent which has 54 countries to USA’s Delta Airlines fleet, he said: “The whole continent has less than 1,000 aircraft while Delta Air Lines, alone operates about 1,500 aircraft. That tells you the size of the gap we are dealing with.”

According to him, something is wrong somewhere that Africa cannot leverage on its population and the geographical size.

“With 52 airlines — flag carriers across the continent — only seven are fully operational, and of those seven, only one is profitable,” he added.

He noted that Africa, with a population of about 1.4 billion people, contributes just two per cent to global aviation, a figure he described as disproportionately low given its size and economic potential.

Munetsi was miffed that the continent operated fewer than 1,000 aircraft in total, a number he said underscored the scale of the challenge facing African aviation.

He attributed the situation to a mix of economic constraints and regulatory inefficiencies, stressing that many African economies are not structured to support sustainable airline operations or fleet expansion.

He further revealed that African airlines were struggling to generate significant revenue, with some earning less than one million dollars in returns, a situation he described as unsustainable for an industry that requires heavy capital investment.

However, the International Air Transport Association (IATA) has at different fora advised African nations to desist from over taxing the aviation industry. The global body had observed that governments in Africa see air transport as elitist instead of vehicle for economic development. “So, they tax aviation as a major source of income generation; just as the federal government insists that aviation agencies must remit significant portion of its revenue to government coffers,” IATA said.

Agencies have to tax passengers and airlines to meet government targets and that is the major reason why operating airlines in Nigeria is costly. It is also the reason why less than one per cent of Nigerians travel by air because of its relative high prices.