The Federal Government has reduced the interest rate charged on late tax payments, aligning it more closely with market rates under a new Order that takes effect on October 1, 2026.
The Order, issued by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, sets new interest rates for unpaid taxes in naira and foreign currencies, with the aim of improving transparency, certainty and consistency across federal, state and Federal Capital Territory tax authorities.
Under the new framework, interest on late tax payments made in naira will be charged at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point, replacing the previous five-percentage-point margin.
However, the rate will not fall below the yield on 364-day Treasury Bills, which reflects the cost of government borrowing.
For taxes payable in foreign currencies, interest will be charged at the Secured Overnight Financing Rate (SOFR), a benchmark for US dollar interest rates, plus six percentage points. If SOFR is discontinued, its officially designated successor rate will apply.
The Order provides for one interest rate per calendar month, set on the last business day of the preceding month. The Nigeria Revenue Service is required to publish the applicable rates on its website by the third business day of each month.
Interest will be calculated daily using simple interest, from the date payment becomes due until the tax is paid.
Speaking on the Order, 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 delay in paying 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 new rates apply to interest arising from October 1, 2026, including interest on taxes that became due before that date. Interest accrued before the effective date will remain subject to the rules in force at the time, where specifically provided.
The Order supersedes the 2017 notice on interest on unpaid taxes and other earlier notices on the subject.
However, the 10 per cent penalty for late payment under Section 65 of the Nigeria Tax Administration Act, 2025, remains unchanged. Tax authorities also retain the power under Section 66 to waive penalties or interest where good cause is shown.
Taxpayers are advised to file their returns and pay applicable taxes on time, check the monthly rates published by the Nigeria Revenue Service and settle outstanding liabilities promptly or engage the relevant tax authority.
The Order follows tax reforms under the Nigeria Tax Administration Act, 2025, replacing the previous five-point interest margin with a one-point margin above the CBN’s Monetary Policy Rate, subject to a Treasury Bill-linked minimum.
Ademide Adebayo
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