The Federal Government of Nigeria has introduced a new interest regime for late tax payments, effective October 1, 2026. The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, issued the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, pursuant to Section 65 of the Nigeria Tax Administration Act, 2025. This new regime aims to tighten the financial consequences for taxpayers who delay paying public revenue.
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. For taxes payable in foreign currency, the applicable interest will be SOFR plus six percentage points. The new regime will also introduce monthly rate-setting, with the applicable rate for each calendar month determined on the last business day of the preceding month.
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. This new framework aims to improve certainty and consistency in tax administration, allowing taxpayers to know the rate in advance and be charged in the same way.
According to Oyedele, delayed tax payments ultimately impose a financing cost on government and the wider economy. He stated 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, and the cost falls on everyone. The Minister said the framework was designed to prevent taxpayers from effectively using unpaid taxes as a cheaper source of credit.
The new 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.
The new Order does not alter the 10 percent 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 separates the two components of the financial consequence of late payment: the statutory 10 percent default penalty remains unchanged.
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.
Key points
- The new interest regime for late tax payments links costs to prevailing market rates.
- The applicable interest rate for taxes payable in naira will be charged at the Central Bank of Nigeria's Monetary Policy Rate (MPR) plus one percentage point.
- The new framework aims to improve certainty and consistency in tax administration.
