The Federal Government has reduced the interest rate charged on late payment of taxes, with the new regime taking effect from October 1, 2026….
The Federal Government has reduced the interest rate charged on late payment of taxes, with the new regime taking effect from October 1, 2026.
The measure is contained in the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, issued by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele.
The order was issued pursuant to Section 65 of the Nigeria Tax Administration Act, 2025, and establishes a new formula for determining interest payable when taxpayers fail to settle their tax liabilities by the due date.
Under the new framework, interest on tax payable in naira will be charged at the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus one percentage point.
The rate will, however, not fall below the yield on 364-day Treasury Bills.
The new formula represents a reduction from the previous five-percentage-point spread and is intended to bring the cost of delayed tax payments closer to prevailing market conditions.
For tax liabilities payable in foreign currency, the applicable interest rate will be the Secured Overnight Financing Rate (SOFR) plus six percentage points.
Where SOFR is discontinued, the official successor benchmark will be used.
Monthly interest rate
The order provides for one applicable interest rate for each calendar month.
The Nigeria Revenue Service is required to publish the applicable rate on its website by the third business day of every month, giving taxpayers advance information on the cost of delayed payments.
Interest will be calculated as simple interest on a daily basis, beginning from the date the tax became due and continuing until the liability is paid.
The new regime will apply to self-assessment by taxpayers and assessments administered by the Nigeria Revenue Service, State Internal Revenue Services and the Federal Capital Territory Internal Revenue Service.
The Federal Government said the new framework is intended to provide greater certainty and consistency in the administration of late-payment interest across the country.
FG explains rationale
Explaining the policy, Oyedele said the cost of delaying tax payments should reflect the financial implications to government when revenue due to it is withheld.
“Tax that is due belongs to the public. When it is paid late, Government may have to borrow to fill the gap, and the cost falls on everyone,” the minister said.
“This Order ties the cost of late payment to real market rates, so that delaying tax does not become a cheaper form of credit than the market itself.”
The minister also highlighted the importance of certainty for taxpayers, particularly with the new requirement for the applicable rate to be published monthly.
“Just as important is certainty. Every taxpayer, whether dealing with the Nigeria Revenue Service or a State revenue service, will know the rate in advance, see it published every month, and be charged in the same way,” Oyedele said.
“Clear rules make compliance easier and support a fair, predictable tax system.”
What changes for taxpayers?
For taxpayers whose liabilities are denominated in naira, the interest calculation will now be linked directly to the CBN’s MPR, with a one-percentage-point addition.
However, the Treasury Bill floor means the applicable interest rate cannot fall below the yield on 364-day Treasury Bills.
For foreign-currency tax liabilities, the calculation will be based on SOFR plus six percentage points.
The framework also means that the rate can change from one month to another as the underlying benchmark rates change.
Taxpayers will therefore be able to determine the applicable rate for a particular month from the rate published by the Nigeria Revenue Service.
Existing penalties remain
The reduction in the interest spread does not remove the separate penalty for late payment of tax.
The 10 per cent late-payment penalty provided under Section 65 of the Nigeria Tax Administration Act remains applicable.
The order also preserves the authority of relevant tax authorities to waive interest or penalties where good cause is established, as provided under Section 66 of the Act.
This means that taxpayers who delay payment could still face both the applicable interest and the statutory late-payment penalty, subject to the provisions of the law and any approved waiver.
Treatment of existing tax liabilities
The order also sets out transitional arrangements for taxpayers with outstanding liabilities.
The new rates will apply to interest arising from October 1, 2026, including interest on tax that became due before that date.
However, interest that had already arisen before October 1 will not be retrospectively affected where it was specifically governed by the rules in force at the time.
The 2026 order supersedes the 2017 notice on interest on unpaid taxes and any other earlier notices dealing with the subject.
Government urges timely compliance
The Federal Ministry of Finance advised taxpayers to file their returns and pay applicable taxes within the prescribed deadlines.
Taxpayers with outstanding liabilities were also encouraged to settle their obligations promptly or engage the relevant tax authority over their liabilities.
The government said the new framework is aimed at making the administration of late-payment interest clearer and more predictable while ensuring that taxpayers do not have a financial incentive to retain tax revenue after it becomes due.
The Nigeria Revenue Service is expected to begin publishing the applicable monthly rates under the new regime from October 2026.
