By Ade Oyeyemi
The Federal Government has reduced the interest rate charged on late payment of taxes, with the new regime taking effect from October 1, 2026.
The Federal Ministry of Finance announced the change 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 order, taxpayers who settle their naira-denominated tax liabilities after the due date will be charged interest at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point.
The new rate represents a reduction from the previous five-percentage-point margin. However, the applicable interest rate will not be lower than the yield on 364-day Treasury Bills.
The ministry said the order was issued pursuant to Section 65 of the Nigeria Tax Administration Act, 2025, and would apply consistently to tax authorities at the federal, state and Federal Capital Territory levels.
For tax liabilities denominated in foreign currencies, the applicable interest will be based on the Secured Overnight Financing Rate, commonly known as SOFR, plus six percentage points.
The ministry added that where SOFR is discontinued, its officially designated successor benchmark would be used.
Under the new framework, a single interest rate will apply throughout each calendar month. The Nigeria Revenue Service is expected to publish the applicable rate on its website no later than the third business day of every month.
The ministry further explained that interest would be calculated as simple interest on a daily basis, beginning from the date the tax became due until the outstanding amount was fully paid.
Explaining the rationale behind the reform, Oyedele said the revised system was designed to link the cost of delayed tax payments to prevailing market conditions.
“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.
Oyedele added that the new arrangement would provide taxpayers with greater certainty by making the applicable rate publicly available and ensuring that taxpayers across different jurisdictions were treated under the same framework.
The ministry said the new rates would apply to interest accruing from October 1, 2026, including interest relating to tax liabilities that became due before that date.
It, however, clarified that interest which accrued before October 1 would remain governed by the rules applicable at the time it arose.
The order replaces the 2017 notice on interest charged on unpaid taxes, as well as other previous notices dealing with the issue.
The ministry stressed that the reform does not affect the 10 per cent penalty imposed for late tax payment under Section 65 of the Nigeria Tax Administration Act.
It also noted that tax authorities retain the authority under Section 66 of the Act to waive applicable penalties or interest where sufficient grounds are established.
The government urged taxpayers to file their returns and settle their tax obligations within the prescribed deadlines, while those with outstanding liabilities were advised to make payment promptly or engage the relevant tax authority over their obligations.
