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The Federal Government has introduced a new framework that reduces the interest charged on late payment of taxes, with the new regime scheduled to take 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, pursuant to Section 65 of the Nigeria Tax Administration Act, 2025.
Under the new arrangement, interest on taxes payable in naira will be calculated at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point, subject to a minimum based on the yield on 364-day Treasury Bills.
This represents a reduction from the previous framework, under which the applicable spread was five percentage points above the MPR.
For taxes payable in foreign currencies, the government has set the interest rate at the Secured Overnight Financing Rate (SOFR) plus six percentage points.
The Nigeria Revenue Service will publish the applicable interest rate by the third business day of every month, giving taxpayers advance information about the cost of delayed payments.
Oyedele said the new system is intended to make the rules more predictable while ensuring that delaying tax payments does not become a cheaper alternative to borrowing money commercially.
The government explained that taxes paid late can create revenue shortfalls that may require government borrowing, making it necessary to link late-payment interest more closely to prevailing market conditions.
Importantly, the new order does not abolish the existing 10 per cent penalty for late payment under Section 65. A taxpayer in default may therefore still face the statutory penalty in addition to the applicable interest charge.
The new rates will apply to interest arising from October 1, including interest on tax liabilities that became due before that date. Interest accrued before October 1 will generally remain subject to the rules applicable at the time.
The order supersedes the 2017 notice on interest on unpaid taxes and earlier notices dealing with the issue.
The Federal Government has advised individuals and businesses with outstanding tax liabilities to settle them promptly or engage the appropriate tax authority, while taxpayers are encouraged to monitor the monthly rates published by the Nigeria Revenue Service.
