The Federal Government has introduced a new market-linked system for calculating interest on late tax payments, with the new rates taking effect from October 1, 2026.
Under the framework, taxpayers who fail to settle their tax liabilities when due will pay interest tied to prevailing financial-market benchmarks, in addition to the existing 10 per cent late-payment penalty.
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, pursuant to Section 65 of the Nigeria Tax Administration Act, 2025.
For tax liabilities payable in naira, the applicable interest rate will be the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus one percentage point, subject to a floor equivalent to the yield on 364-day Treasury Bills.
The Finance Ministry said the new one-percentage-point margin represents a reduction from the five-percentage-point margin previously applicable.
For tax liabilities denominated in foreign currencies, interest will be charged at the Secured Overnight Financing Rate (SOFR) plus six percentage points. Where SOFR is discontinued, its officially designated successor benchmark will apply.
Oyedele said the new framework was designed to ensure that taxpayers do not gain an advantage by delaying payments owed to government.
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“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.
He added that linking late-payment interest to market rates would make the cost of delaying tax payments more transparent and predictable.
Under the order, a single interest rate will apply for each calendar month. The rate will be determined using the applicable benchmark on the last business day of the preceding month.
The Nigeria Revenue Service (NRS) is required to publish the applicable rates on its website by the third business day of every month.
Interest will be calculated on a simple-interest basis daily, starting from the date the tax becomes due until the outstanding liability is fully paid.
The framework applies to both self-assessment taxes and assessments administered by the NRS, as well as state and Federal Capital Territory (FCT) internal revenue services.
Oyedele said the uniform approach would provide taxpayers with greater certainty regardless of the tax authority administering their liabilities.
“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,” he said.
The ministry clarified that the new order does not abolish the existing 10 per cent penalty for late payment under Section 65 of the Nigeria Tax Administration Act.
Consequently, taxpayers who default may face both the statutory 10 per cent penalty and the applicable market-linked interest.
However, tax authorities retain the power under Section 66 of the Act to waive penalties or interest where a taxpayer demonstrates good cause.
The new rates will apply to interest arising from October 1, including interest on taxes that became due before that date. Interest accrued before October 1 will continue to be governed by the rules applicable at the time.
The order also supersedes the 2017 notice on interest on unpaid taxes and other previous notices on the matter.
The ministry urged taxpayers with outstanding liabilities to settle them promptly or engage the relevant tax authority, while advising all taxpayers to monitor the monthly published rates and comply with filing and payment deadlines.