The Federal Government of Nigeria has introduced a new interest rate regime on late payment of taxes, effective October 1, 2026. According to 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 new rate will be based on the Central Bank of Nigeria's (CBN) Monetary Policy Rate (MPR) plus one percentage point. This move aims to link the cost of late tax payment more closely to prevailing market rates.
Under the new order, interest on tax payable in naira will be charged at the CBN's MPR plus one percentage point, subject to a floor of 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) plus six percentage points. The order also provides that where SOFR is discontinued, its officially recognised successor rate will apply. This change represents a reduction from the previous five percentage-point spread applicable to late tax payments.
The Minister of Finance, Taiwo Oyedele, stated that the new framework was designed to ensure that delaying tax payments does not become a cheaper source of financing than borrowing from the market. He emphasized that tax that is due belongs to the public and that when it is paid late, the government may have to borrow to fill the gap, which can increase the cost for everyone. Oyedele added that the new order ties the cost of late payment to real market rates.
The applicable interest rate will be set once every calendar month, based on the position at the last business day of the preceding month. The Nigeria Revenue Service (NRS) has been directed to publish the applicable rates on its website by the third business day of each month. This move aims to promote certainty and consistency in tax administration across the country.
The interest will be calculated as simple interest on a daily basis, running from the due date until the tax liability is settled. 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 arose before October 1 will not be affected to the extent that it was specifically provided for under the rules in force at the time.
The new regime applies to self-assessment by taxpayers, the Nigeria Revenue Service, and the State and Federal Capital Territory Internal Revenue Services. The Federal Government advised taxpayers to file their returns and pay applicable taxes within the stipulated deadlines, while those with outstanding liabilities were encouraged to settle them promptly or engage the relevant tax authority.
The government clarified that the new order does not alter 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 interest or penalties where good cause is established. The order supersedes the 2017 notice on interest on unpaid taxes and other earlier notices on the subject.
Key points
- The new interest rate regime on late tax payments will be based on the CBN's MPR plus one percentage point for taxes payable in naira.
- The new framework aims to link the cost of late tax payment more closely to prevailing market rates.
- The applicable interest rate will be set once every calendar month and published on the Nigeria Revenue Service's website.
