The Federal Government has reduced the interest rate payable on late tax payments, linking the charge on naira-denominated tax liabilities to the Central Bank of Nigeria’s Monetary Policy Rate (MPR), with the new regime taking effect from October 1, 2026.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, disclosed this in a statement announcing the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026.
The Order, issued under Section 65 of the Nigeria Tax Administration Act, 2025, replaces the previous five-percentage-point spread and is intended to align the cost of delayed tax payments more closely with prevailing market rates.
Under the new framework, interest on tax payable in naira will be charged at the CBN’s MPR plus one percentage point. However, the applicable rate will not fall below the yield on 364-day Treasury Bills.
For taxes payable in foreign currency, the interest rate will be based on the Secured Overnight Financing Rate (SOFR), the international benchmark for US dollar interest rates, plus six percentage points. Where SOFR is discontinued, its officially designated successor rate will apply.
The new rates will be reviewed monthly, with one rate applicable throughout each calendar month. The Nigeria Revenue Service (NRS) is required to publish the applicable rates on its website by the third business day of every month.
The interest will be calculated as simple interest on a daily basis, beginning from the tax due date until the outstanding liability is settled.
The framework applies to taxpayers under self-assessment as well as tax liabilities administered by the NRS and State and Federal Capital Territory (FCT) Internal Revenue Services.
Explaining the rationale for the new regime, Oyedele said the cost of delaying tax payments should reflect the financial cost to government of not receiving revenue when due.
“Tax that is due belongs to the public. When it is paid late, the Government may have to borrow to fill the gap, and the cost falls on everyone,” the minister said.
He added that the new system would provide greater certainty to taxpayers by ensuring that the applicable rate is published monthly and applied uniformly across the federal, state and FCT tax authorities.
The Order provides that the new rates will apply to interest arising from October 1, 2026, including interest on tax liabilities that became due before that date.
However, interest that arose before October 1 will remain subject to the rules in force at the time, where specifically provided for under the applicable regulations.
The new Order supersedes the 2017 notice on interest on unpaid taxes and other earlier notices covering the subject.
The government clarified that the reform does not affect the 10 per cent penalty for late payment provided under Section 65 of the Nigeria Tax Administration Act.
Tax authorities also retain the power under Section 66 of the Act to waive applicable penalties or interest where good cause is established.
The Federal Ministry of Finance advised taxpayers to file their returns and settle their tax obligations promptly, while those with outstanding liabilities were encouraged to either settle them or engage the relevant tax authority.
The new arrangement is expected to give taxpayers a clearer basis for determining the financial implications of delayed tax payments while ensuring that the cost of withholding government revenue reflects prevailing funding conditions.
