The Federal Government has lowered the interest rate charged on late payment of taxes, with the new regime set to take effect from October 1, 2026.
The Federal Ministry of Finance announced the change in a statement issued in Abuja on Thursday, following the issuance of the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele.
Under the new framework, late tax payments made in naira will attract interest at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point. This replaces the previous five-percentage-point margin.
However, the applicable rate will not be lower than the yield on 364-day Treasury Bills, which the ministry said reflects the government’s borrowing cost when tax payments are delayed.
The ministry said the order was issued pursuant to Section 65 of the Nigeria Tax Administration Act, 2025, and would apply consistently across tax authorities at the Federal, State and Federal Capital Territory levels.
“For tax payable in Naira, interest is charged at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point. This is a reduction from the spread of five percentage point previously applicable but the rate will not fall below the yield on 364-day Treasury Bills, which reflects what it costs Government to fund itself when taxes are paid late,” the ministry stated.
For tax liabilities denominated in foreign currency, the ministry said the applicable interest rate would be the Secured Overnight Financing Rate, the international benchmark for US dollar interest rates, plus six percentage points.
It added that the official successor to SOFR would be used if the benchmark is discontinued.
According to the ministry, a single rate will apply throughout each calendar month, while the Nigeria Revenue Service will be required to publish the applicable rate on its website by the third business day of every month.
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Interest will be calculated as simple interest on a daily basis, beginning from the date the tax becomes due and continuing until the outstanding amount is paid.
Explaining the rationale behind the new framework, 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. This Order ties the cost of late payment to real market rates, so that delaying tax does not become a cheaper form of credit than the market itself.”
He added, “Just as important is certainty. 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. Clear rules make compliance easier and support a fair, predictable tax system.”
The ministry said the revised rates would apply to interest accruing from October 1, 2026, including interest relating to taxes that became due before the commencement date.
It, however, clarified that interest already accrued before October 1 would remain governed by the rules applicable at the time, where those rules specifically provided for such interest.
The new order replaces the 2017 notice governing interest on unpaid taxes, as well as other previous notices dealing with the issue, the ministry said.
The ministry also stressed that the order does not alter the 10 per cent late-payment penalty prescribed under Section 65 of the Nigeria Tax Administration Act.
It said tax authorities may still exercise their powers under Section 66 of the Act to waive penalties or interest where taxpayers demonstrate good cause.
The ministry urged taxpayers to submit their returns and pay their tax obligations as they fall due, while those with existing liabilities were advised to pay promptly or contact the appropriate tax authority.