Hurdles, outlook for Nigerian carriers in 2026

The aviation industry in 2025 was mixed. There were numerous benefits that the entire aviation ecosystem derived from the past year. WOLE SHADARE
examines the outlook for the airline sub-sector for 2026

The nation’s economy enters 2026 on a trajectory of cautious optimism, having transitioned from post-reform stabilisation to a modest recovery, even if challenges persist. The same could be said of the aviation industry, particularly the airline sector.

The International Monetary Fund (IMF) forecasts Nigeria’s GDP growth at 3.9 per cent for 2025, rising to 4.2 per cent in 2026, positioning the country as Africa’s third-largest economy with a nominal GDP of around $334 billion.

But for airline owners, the view is less scenic. While the industry has shown remarkable resilience, it is currently navigating a perfect storm of fiscal, regulatory, and structural headwinds that threaten to ground its dreams.

Airlines’ Rescue

As we move deeper into 2026, the challenges are no longer just about getting planes in the air—they are about keeping the companies behind them solvent. The most discussed crisis of 2025, which resurfaced early in 2026, is the fare cliff.

Airline owners, including Air Peace CEO Allen Onyema, have warned that domestic economy-class tickets could soar to ₦1 million due to a convergence of costs. The primary culprit is a controversial new tax regime.

Despite government assurances that reforms are intended to harmonise the sector, operators are preparing for the reintroduction of a 7.5 per cent Value-Added Tax (VAT) on aircraft, engines, and spare parts.

In an industry where an engine can cost millions of dollars, a 7.5 per cent hit in a 35 per cent interest rate environment is, in the words of one operator, “a death sentence for liquidity.” If the new tax law remains in place and Air Peace and others raise fares to nearly the level Onyema suggested, many air travellers will likely be discouraged from air travel.

The Paradox

Nigerian aviation faces a paradox: a large population and distances should favour air travel, but a low Propensity to Fly (PTF) persists due to high costs, infrastructure gaps, security fears, and inconsistent experiences, despite significant GDP contribution and potential.

High fares, limited connectivity, and poor service hinder growth, making the sector hostile to tourists despite its economic importance and potential for job creation. The airline industry, even before the astronomical fares during the Yuletide, had experienced a significant reduction in air travel of more than 35 per cent.

Airfares, especially on popular domestic routes like Lagos-Abuja, are often significantly higher than in other regions, pricing out many potential travellers.

Maintenance Brain Drain

Every time a Nigerian aircraft requires a “C-Check” (major maintenance), it must often be ferried to Europe or the Middle East. In 2026, this will remain the industry’s largest haemorrhage.

Experts said it costs roughly $400,000 to fly a plane to a foreign maintenance facility and back, even before the actual repairs begin.

Due to global supply chain delays and a backlog at foreign MRO (Maintenance, Repair, and Overhaul) centres, some Nigerian aircraft remain idle for months, thereby reducing domestic capacity. The regulator is no longer playing nice.

Beginning from January 2026, the Nigerian Civil Aviation Authority (NCAA) would officially implement its Zero Debt Strategy. Airlines must now provide mandatory Advance Payment Guarantees (APG) as a precondition for operations.

This move is designed to stop the accumulation of billions in unpaid regulatory fees, but for struggling carriers, it adds yet another layer of immediate cash-flow pressure.

The Competitive Imbalance

Nigerian carriers continue to fight for a sliver of the international pie. Currently, foreign airlines account for over 90 per cent of Nigeria’s $1.7 billion global market.

Domestic players are struggling to scale their operations to compete on long-haul routes, hampered by high Insurance Premiums: Nigerian airlines still pay some of the highest insurance rates in the world due to the “country risk” tag.

Leasing Hiccups

While progress has been made in Cape Town Convention compliance, most local carriers still find it difficult to secure “dry leases” (renting the aircraft without crew/ insurance), thereby forcing them into more expensive “wet lease” arrangements.

For the first time in many years, Nigerian airlines received aircraft on dry lease for the first time in years, following Nigeria’s removal from a global blacklist after signing the Cape Town Convention, enabling carriers to access cheaper, more flexible aircraft leasing, reducing costs, boosting fleet size, and improving services with government backing.

Lessors previously blacklisted Nigeria due to past defaults, thereby precluding dry leases (in which the airline receives only the aircraft). The government’s intervention, including its ratification of the Cape Town Convention and the provision of guarantees, persuaded lessors to return.

Dry leases are significantly cheaper than wet leases (which include crew, maintenance, etc.), saving airlines money and cutting capital flight.

The outlook

A former Chief Operating Officer of IRS Airlines, Mr Yemi Dada, said his outlook for the airline sub-sector in 2026 will not be significantly different because the sector has not resolved the fundamental issues affecting the industry.

He said: “I know that the government is pursuing the concession programme, which will be one-sided. Airlines are still not receiving the financing required to expand capacity appropriately. The evolution of state-owned airlines will continue which is more or less cannibalizing the industry into small fiefdoms if I may say. It is not a positive year, but by the end of the year, the government should recognise the need for a more comprehensive assessment of the industry’s fundamentals to enable repurposing.”

“As it is going, it is not heading anywhere. People are bringing in private jets, whether legal or illegal, flying everywhere. We have more private jets than commercial aircraft. The commercial aircraft population is reducing and will continue to do so. The infrastructure will improve marginally because of what has been done in Lagos, but little else is expected to happen.”

The Managing Director of Aero Contractor, Capt. Ado Sanusi stated that he believes 2026 will bring significant benefits and growth for the airline industry despite the new tax regime.

According to him, “I believe that the tax regime will stunt our growth, reduce the growth rate. I think the industry will continue to prosper because passenger rates, according to IATA, are still increasing, and across all indices, passenger rates are rising; the industry will continue to grow.”

Last line

The year 2026 will be defined as the year of sifting. Stronger players with diversified revenue streams and state-backed support (such as Ibom Air or the newly aggressive Ebonyi Air) are finding ways to pivot. However, for the smaller, older carriers, the runway is getting shorter. The survival of Nigerian aviation this year depends less on passenger numbers and more on the ability of the government and private sector to agree on a “fiscal ceasefire.”

Wole Shadare