Local Carriers to Save N26.5bn Annually from Waiver on Tariffs

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Chinedu Eze

Nigerian airlines will save as much as N26.5billion annually from waiver on tariffs for the importation of aircraft and parts, which take large chunks of operators’ revenues.

Airlines pay duties on aircraft importation, aircraft spares, engines and other accessories and each airline imports spares many times a year. Also, every spare in an aircraft is imported so domestic carriers spend so much in foreign exchange on spare parts importation.

The Nigeria Customs Service charges five per cent duty on the total cost of every aircraft spare imported into the country and the price of average engine of Boeing 737, which is the commonly used aircraft type among Nigerian airlines, ranges from $500,000 to $1million or more depending on engine life and capacity.

More regularly, airlines import tyres, rotaries, engine oil and spares and duties are paid on every part imported.

According to an operator, main tyre today costs about $4000 and every week airlines change the tyres of their aircraft, depending on the number of landings. The waiver has saved the airlines the duty hitherto paid on the importation of these parts.

Although duty waiver for airlines has been off and on in the past 10 years, the Customs recently issued a statement confirming the waiver of duties for domestic airlines.

An official of one of the airlines said this would help the operators to save money, which would be channelled to other areas of their businesses.
“This means the era of Customs holding on to airlines has become a thing of the past. One of the gains is downtime operation because an airline can import an engine and within a day clear it and on the second day mount it on the aircraft and start operation. But to make this work quicker, every airline should have liaison officer that can facilitate clearing with Customs,” the official said.

The Executive Chairman of Airline Operators of Nigeria (AON), Captain Nogie Meggison, who commended the federal government and the Minister of State for Aviation, Senator Hadi Sirika for making this possible, noted: “We also commend the government for graciously identifying with the pains of the Nigerian travelling public by extending its support for commercial airlines in the country and reaffirming the Zero-Duty and VAT payment on the importation of commercial airplanes and its spare parts as a way of alleviating the cost burden and ensuring safe flight operations.”

Meggison explained that the clarification on the Zero Duty and VAT was contained in a letter dated June 20, 2016 and signed by the Nigeria Customs Service. It stated inter alia that: “I am directed to inform you that by virtue of the Federal Government 2013 Fiscal Policy measures, Ref No. BD.12237/S.1008/T/11 dated 15th January, 2013. All Commercial Aircraft & its Spare Parts imported for use in Nigeria shall attract import duty rate of zero per cent (0%) and zero per cent (0%) VAT respectively.”

Furthermore, the letter noted: “Approval for the implementation of the ECOWAS Common External Tariff (CET) 2015 – 2019 and 2015 Fiscal Policy measures (National List) confirmed the extension of the 2013 Fiscal Policy measures.”
The waiver has received commendation from airline operators who said it is one of the incentives given to the domestic carriers to help sustain their business.