By Abiodun Folarin
WorldStage– The Federal Government of Nigeria has reduced the interest rate applicable to late payment of taxes, with the new regime taking effect from 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, under Section 65 of the Nigeria Tax Administration Act, 2025.
Under the new Order, 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 represents a reduction from the previous five percentage point spread and is designed to align the cost of delayed tax payments more closely with prevailing market rates.
For taxes payable in foreign currency, the applicable interest rate will be the Secured Overnight Financing Rate (SOFR) plus six percentage points.
The Federal Government said the new framework would provide taxpayers with greater certainty over the financial implications of late payment while ensuring that delaying tax obligations does not become a cheaper source of financing than borrowing from the market.
The applicable rate will be reviewed monthly, with one rate applying throughout each calendar month. The Nigeria Revenue Service (NRS) is required to publish the rate on its website by the third business day of every month.
The interest will be calculated as simple interest on a daily basis, beginning from the date the tax becomes due until the date of payment.
The new regime will apply to self-assessment taxpayers, the Nigeria Revenue Service as well as State and Federal Capital Territory Internal Revenue Services.
Oyedele said the policy was intended to balance the interests of taxpayers with the cost to government of delayed revenue collection.
“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 said.
According to him, tying the cost of late payment to market rates would prevent delayed tax payments from becoming a cheaper alternative to market borrowing.
The Minister also stressed that the monthly publication of rates would improve certainty and promote a more predictable tax administration system.
The Order provides 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 at the time, where specifically provided for under those rules. The new Order also supersedes the 2017 notice on interest on unpaid taxes and other earlier notices on the subject.
The government clarified that the new Order does not alter the 10 per cent penalty for late payment under Section 65 of the Act.
Tax authorities will also retain the power under Section 66 of the Act to waive penalty or interest where good cause is established.
The Federal Ministry of Finance advised taxpayers to file their returns and pay applicable taxes promptly, while those with outstanding liabilities were encouraged to settle them or engage the relevant tax authority.
