The Federal Government has introduced a new system for calculating interest on late tax payments, replacing the previous five-percentage-point spread with rates linked to prevailing market benchmarks.
The Nigeria Tax Administration Order 2026, signed by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, will take effect from October 1, 2026.
Under the new order, interest on tax liabilities payable in naira will be charged at the Central Bank of Nigeria’s (CBN) Monetary Policy Rate plus one percentage point (MPR+1%).
The new spread represents a reduction from the five percentage points previously applicable. However, the rate will not fall below the yield on 364-day Treasury Bills, reflecting the government’s cost of funding when taxes are paid late.
For tax liabilities payable in foreign currency, interest will be charged at the Secured Overnight Financing Rate, SOFR, plus six percentage points. Where SOFR is discontinued, its official successor rate will apply.
The Nigeria Revenue Service has been directed to publish the applicable rates on its website by the third business day of every month, with each rate applying for that calendar month.
The new provisions were issued under Section 65 of the Nigeria Tax Administration Act, 2025, and are intended to provide greater certainty over the cost of late tax payments while aligning the charges more closely with market conditions.
The order applies to interest arising from October 1, including interest on tax liabilities that became due before that date. However, interest that arose before October 1 will remain subject to the rules in force at the time.
The new order supersedes the 2017 notice on interest on unpaid taxes and other earlier notices on the subject.
It does not alter the 10 per cent penalty for late payment prescribed under Section 65 of the Nigeria Tax Administration Act.
Tax authorities also retain powers under Section 66 of the Act to waive penalty or interest where good cause is established.
Oyedele said the new framework would ensure that delaying tax payments did not become a cheaper source of credit than borrowing at prevailing market rates.
He 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.”
The minister also said taxpayers would be able to know the applicable rate in advance through its monthly publication.
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 minister advised taxpayers to file their returns and settle applicable liabilities on time, while those with outstanding tax obligations were encouraged to pay promptly or engage the relevant tax authority.
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