Nigerian airlines earn naira but pay 90% of costs in dollars

Nigerian domestic airlines are caught in a structural currency mismatch: they earn mainly in naira but pay almost 90 percent of their operational costs in dollars, according to industry estimates. Aircraft leases, spare parts, maintenance checks, engine overhauls, aviation insurance and some crew training all have to be settled in foreign currency.

The result is that every naira depreciation raises the cost of operating the same aircraft, even when fleet size, passenger numbers and revenues stay unchanged.

Lease obligations top $1m monthly for mid-sized carriers

Aviation finance expert Sam Onitilo described the problem as structural, embedded in the balance sheets of Nigerian airlines. He said the pressure goes beyond fuel prices, ticket fares and access to foreign exchange. For an airline earning naira while making fixed dollar payments every month, currency depreciation can turn a manageable obligation into a crippling burden.

Onitilo estimated that an airline running four narrow-body aircraft under operating leases faces between $400,000 and $700,000 in monthly lease obligations. A medium-sized carrier with six or seven aircraft could see monthly lease commitments exceed $1 million before fuel, salaries, airport charges, maintenance and spare parts are counted.

Lease payments are only the start. Foreign lessors typically demand security deposits equal to one to three months' rent, while maintenance reserves are also paid in dollars to cover future heavy maintenance, engine overhauls and component replacement. Lease agreements run for several years and are often governed by foreign jurisdictions. A default could trigger penalties, repossession or grounding of aircraft, wiping out a large part of an airline's capacity.

Offshore maintenance drains $300m to $400m yearly

Nigeria has limited capacity for major aircraft maintenance, repair and overhaul. Airlines routinely send aircraft, engines and components abroad, mainly to Europe, the Middle East and other African aviation centres including Ethiopia. Industry estimates put annual spending on offshore maintenance and technical support at between $300 million and $400 million.

Aircraft tyres, brakes, filters and other consumables are largely imported, while engine repairs or replacements can cost millions of dollars. Nogie Meggison, former president of the Airline Operators of Nigeria, has noted that airlines must continuously replace tyres, deal with wear and tear and confront increasingly expensive engine repairs as aircraft age. Expatriate pilots, simulator sessions, type-rating programmes and recurrent training overseas are also billed in dollars, euros or pounds.

An executive of an international airline, who spoke anonymously, said: "Most of the cost of operations comes from abroad."

During previous periods of severe forex shortages, some Nigerian airlines waited between six and 10 weeks to access dollars through official channels. Others bought foreign currency in more expensive alternative markets while aircraft stayed grounded for lack of parts. West Link Airlines owner Ibrahim Mshelia said: "The high naira exchange value to the dollar and scarcity is a real issue. Parts and maintenance definitely have a share of the problems."

Jet A1 at N3,300 and the VAT threat

The foreign exchange burden has been compounded by an aviation fuel shock. The Airline Operators of Nigeria warned that Jet A1 rose from about N900 per litre in late February 2026 to roughly N3,300 per litre within weeks, far above the roughly 30 percent rise in international crude prices over the same period. AON President Abdulmunaf Sarina warned that revenues no longer cover fuel costs alone, and said one carrier had grounded its entire operation since mid-March.

Air Peace Chairman Allen Onyema has warned that the proposed reintroduction of 7.5 percent VAT on aircraft, engines and spare parts could raise operating and maintenance costs, with domestic economy class fares potentially nearing N1 million on some routes.

For Nigerian businesses and travellers, the squeeze points in one direction. As long as airlines earn naira and owe dollars, fares will keep climbing and capacity will stay fragile.