The Federal Government has reduced the interest rate applicable to late payment of taxes in naira, with the new rate linked to the Central Bank of Nigeria’s Monetary Policy Rate (MPR).
The Minister of Finance and Coordinating Minister of the Economy, Mr 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.
The Order takes effect from October 1, 2026.
Under the new framework, interest on tax payable in naira will be charged at the CBN’s MPR plus one percentage point, subject to a floor based on the yield on 364-day Treasury Bills.
The new spread represents a reduction from the five percentage-point spread previously applicable to late tax payments.
For taxes payable in foreign currency, the interest rate will be the Secured Overnight Financing Rate (SOFR) plus six percentage points. Where SOFR is discontinued, its officially designated successor rate will apply.
The Order provides for one applicable rate for each calendar month, with the Nigeria Revenue Service required to publish the rate on its website by the third business day of every month.
Interest will be calculated as simple interest on a daily basis, running from the due date until the tax is paid.
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 at the time.
The Order supersedes the 2017 notice on interest on unpaid taxes and other earlier notices on the subject.
The Federal Government said the new framework was designed to align the cost of late tax payment more closely with prevailing market rates while providing taxpayers with greater certainty.
Oyedele said, “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.”
He added that linking late-payment costs to market rates would ensure that delaying tax payments would not become a cheaper form of credit than borrowing from the market.
The Minister also said the framework would make the tax system more predictable by ensuring that taxpayers know the applicable rate in advance and that the rate is published monthly.
The Order does not alter the 10 per cent penalty for late payment prescribed under Section 65 of the Act.
Tax authorities also retain powers under Section 66 of the Act to waive penalties or interest where good cause is shown.
The new provisions apply to self-assessment taxpayers, the Nigeria Revenue Service and State and FCT Internal Revenue Services.
Taxpayers have been advised to file their returns and settle their tax obligations on time, while those with outstanding liabilities are encouraged to make payment or engage the relevant tax authority.