The new airline will be known as Nigeria Air.
Nigerian Minister of State for Aviation, Hadi Sirika made the announcement and unveiled the new branding and livery for the airline at the Farnborough International Airshow in the UK.
"I'm very pleased to tell you that we are finally on track to launching a new national flag carrier for our country: Nigeria Air," Sirika said at the event.
The name was chosen after Nigeria's Ministry of Aviation invited Nigerian youth and students to contribute "their ideas and creativity in developing the new Nigerian Flag carrier," according to the website nameyourairlinenigeria.com.
Nigerian President Muhammadu Buhari's media aide, Bashir Ahmad announced the name on Twitter.
"And it's Nigeria Air ...Bringing Nigeria closer to the world #NigeriaAtFarnborough," Ahmad wrote, alongside a photo of the branding presented at Farnborough.
According to Sirika, the federal government hopes to launch operations by the end of the year.
Nigerians have greeted the announcement with skepticism as they expressed uncertainty about the federal government's capacity to sustain a national airline, especially considering its track record with previous national carriers.
One man wrote on Twitter that he supported the creation of a national airline, "as long as it's not the government running it."
Their fears may be allayed by reports that the airline will be primarily owned and managed by a group of a yet unidentified private investors.
"The Nigerian Government will not own more than 5% (maximum) of the new National Carrier. The government will not be involved in running it or deciding who runs it," Sirika said at the press conference in Farnborough.
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However, some are also questioning the government's involvement in bargaining with aircraft manufacturers such as Boeing in light of Sirika's statement.
"No private investors named but the govt that will supposedly own a tiny percentage is leading negotiations for aircraft purchase and drawing logo in Calibri font. Carry on," London-based Nigerian commentator, Feyi Fawehinmi wrote on Twitter.
Nigeria's federal government has suffered many setbacks in its many attempts to create a new national carrier since Nigerian Airways ceased operations in 2003.
Described as 'Africa's fastest growing airline' in its heyday in the 1980s, Nigeria Airways was plagued by mismanagement, eventually amassing millions of dollars in debt upon its closure.
In 2004, a team of Nigerian investors and Virgin Atlantic Airways, owned by British entrepreneur, Sir Richard Branson signed a joint venture agreement creating a new national carrier, Virgin Nigeria.
Despite reaching record numbers and carrying its 1,000,000th passenger within two years of operations, Virgin Atlantic announced plans to sell its 49% stake in Virgin Nigeria in August 2008, along with a review of whether "the Virgin brand should remain linked to Virgin Nigeria."
In September 2009, Virgin Nigeria announced a name change to Nigerian Eagle Airlines on its website.
In 2010, Nigerian business magnate, Jimoh Ibrahim acquired a majority stake in the carrier and announced a rebranding to Air Nigeria.
The airline eventually ceased operations in September 2012, weeks after laying off the majority of its staff.
Minister Hadi Sirika assured the audience at Farnborough and Nigerians that the new national carrier would be a much sturdier and efficient enterprise.
"I am confident that we will have a well-run national flag carrier, a global player, compliant to international safety standards, one which has the customer at its heart.
"An airline that communicates the essence of our beautiful country, an airline we can all be proud of," Sirika said at the unveiling.