The Federal Government has introduced a new interest regime for late tax payments, linking the cost of delayed payments more closely to prevailing market rates and tightening the financial consequences for taxpayers who delay paying public revenue.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has issued the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, pursuant to Section 65 of the Nigeria Tax Administration Act, 2025.
The Order takes effect on October 1, 2026, and replaces the 2017 notice and other earlier notices governing interest on unpaid taxes.
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, subject to a floor of the yield on 364-day Treasury Bills.
This reduces the applicable spread from the previous five percentage points but introduces a minimum rate designed to ensure delayed tax payments do not cost taxpayers less than the government’s own cost of borrowing.
For taxes payable in foreign currency, the applicable interest will be SOFR plus six percentage points. Where SOFR is discontinued, its officially designated successor rate will apply.
The new regime will also introduce monthly rate-setting. The applicable rate for each calendar month will be determined on the last business day of the preceding month. At the same time, the Nigeria Revenue Service will publish the rate on its website by the third business day of each month.
Interest will be calculated as simple interest daily, running from the date the tax becomes due until the date of payment.
Explaining the rationale for the measure, Oyedele said delayed tax payments ultimately impose a financing cost on government and, by extension, the wider economy.
“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.”
According to him, linking the late-payment charge to market rates is intended to prevent taxpayers from effectively using unpaid taxes as a cheaper source of credit.
The Minister said the framework was also designed to improve certainty and consistency in tax administration.
“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,” he said.
The Order applies to self-assessment arrangements, the Nigeria Revenue Service and State and FCT Internal Revenue Services.
The Federal Government clarified 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 governed by the rules applicable when it arose, where those rules specifically provide for it.
The new Order does not alter the 10 per cent penalty for late payment prescribed under Section 65 of the Nigeria Tax Administration Act.
Tax authorities also retain powers under Section 66 to waive interest or penalties where taxpayers demonstrate good cause.
The new framework therefore separates the two components of the financial consequence of late payment: the statutory 10 per cent default penalty remains unchanged. In contrast, the interest component will now move with specified market benchmarks.
The Federal Government urged taxpayers with outstanding liabilities to settle them promptly or engage the relevant tax authority, while advising taxpayers generally to file returns and make payments within the prescribed deadlines.
Oyedele said the measure effectively establishes a market-linked cost of tax arrears, with the stated objective of reducing incentives to defer tax payments while giving taxpayers a predictable monthly basis for calculating their liabilities.