Addressing NCAA, Airlines’ Debt Impasse

A significant financial impasse has emerged in Nigeria's aviation sector, with domestic airlines collectively owing the Nigerian Civil Aviation Authority (NCAA) over N20 billion. This debt stems from a statutory 5% levy on Ticket Sales Charge (TSC) and Cargo Sales Charge (CSC), collected by airlines on behalf of the NCAA and intended for distribution among five key aviation agencies.

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This ART Advisory notes that these regulatory funds are commingled with operational revenues at the moment of booking, airlines face intense liquidity temptation.

The situation worsened dramatically following a sharp increase in aviation fuel prices, which more than doubled from N900 to N3,500 per liter due to the Middle East crisis. This sudden surge in operational costs pushed airlines to the brink, forcing them to secure loans at exorbitant interest rates of up to 30%. Consequently, the airlines' liquidity was severely impacted, making it impossible to remit the collected TSC and CSC funds to the NCAA, thus accumulating the substantial debt.

The Aviation Safety Round Table Initiative (ASRTI), a think-tank body of industry experts, has intervened, proposing a shift from the current ad valorem percentage system to a fixed rate per ticket. ASRTI argues that the existing model transforms airlines into unpaid tax collectors, forcing them to bear commercial merchant processing fees on funds that do not belong to them. Furthermore, the commingling of regulatory funds with operational revenues at the point of booking creates a strong temptation for airlines to use these funds for daily survival costs, especially in an industry with notoriously thin margins and immediate cash demands for fuel and maintenance.

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In an environment characterised by low single-digit margins and strict cash-before-service demands for Jet A1, aviation fuel and immediate maintenance deadlines, commingled cash is frequently absorbed into daily survival costs.

In an advisory note titled ‘Integrated Framework for Regulatory Fee Basis and Automated Collection,’ ART President Commodore Ademola Onitiju (rtd) highlighted that this commingling leads to a "retrospective accounting nightmare," resulting in multi-billion naira debt backlogs, endless reconciliation disputes, and disruptive "no-pay, no-service" standoffs with regulatory bodies. The proposed fixed rate aims to streamline collection and alleviate the structural flaws that have led to the current crisis.

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This creates a retrospective accounting nightmare, leading to multi-billion-naira debt backlogs, endless reconciliation disputes, and disruptive “no-pay, no-service” regulatory standoffs.