Air travellers in Nigeria should brace themselves for a significant increase in the amounts they will be paying for air tickets, going forward. The expected airfare hike is inevitable now that the Nigerian government has officially increased VAT by some 50%.
Recall that Nigerians were displeased when, earlier this week, President Muhammadu Buhari signed the Finance Bill into law. As Nairametrics reported, the displeasure stemmed mainly from concerns that the increase of VAT from 5% to 7.5% (as contained in the Finance Bill), could trigger price hikes for certain products/services. Air travel is one of such services.
Daily Trust reported that operators in the Nigerian aviation sector admitted that the VAT increase would force them to increase airfares. Unfortunately, it is the air travellers that will bear the cost. One of the operators was quoted as saying the following:
“Definitely passengers would have to bear the brunt. We have always advocated for VAT removal, the government approved it and we were relieved when the former Minister announced the waiver but up till now, it has not been implemented.”
In the meantime, there are also speculations that any increase in airfare will automatically cause the number of air travellers in the country to reduce. A member of the Aviation Roundtable, Olumide Ohunayo, said this could ultimately affect the earning power of airlines in the country.
“If it is not removed and the increment is now included in air transport, obviously fares would increase and if fares increase, you can be sure that passengers would drop and when passengers drop, almost all facets of the industry would be affected by the revenue loss and our dream of increasing the GDP might just be a mirage. You can only improve the industry when you have an improvement in passengers.”
It should be noted that the government previously planned to exempt airlines from remitting VAT. However, this plan has not been implemented, according to aviation stakeholders.
The Finance Bill, which was recently signed by President Muhammadu Buhari, exempted increase of VAT for SMEs and certain goods and services. Read more about the Finance Bill here.