The Federal Government has reduced the interest rate charged on late payment of taxes, with the new rate taking effect from October 1, 2026.
Under the new Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, interest on tax payable in naira will now be charged at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point, down from the previous spread of five percentage points.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, issued the order on Thursday under Section 65 of the Nigeria Tax Administration Act, 2025.
The new order applies to taxpayers dealing with the Nigeria Revenue Service, state revenue services and the Federal Capital Territory Internal Revenue Service.
For tax payable in naira, the interest rate will not, however, fall below the yield on 364-day Treasury Bills.
The ministry said the provision reflects the cost to the government of funding itself when taxes are paid late.
For taxes payable in foreign currency, interest will be charged at the Secured Overnight Financing Rate, SOFR, plus six percentage points.
The applicable rate will be reviewed monthly, with the Nigeria Revenue Service required to publish the rate on its website by the third business day of every month. Interest will be calculated as simple interest daily, from the tax due date until payment.
Explaining the rationale behind the new policy, Oyedele said late payment of taxes creates a funding gap that could force the government to borrow.
“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.
According to the minister, the new order is intended to ensure that taxpayers do not find it financially cheaper to delay paying their taxes than to obtain credit from the market.
“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,” Oyedele said.
The minister said the new system would also provide taxpayers with greater certainty because the applicable rate would be published monthly.
“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.
Oyedele added that “clear rules make compliance easier and support a fair, predictable tax system.”
The Federal Ministry of Finance said the new rates would apply to interest arising from October 1, including interest on tax that became due before that date.
However, interest that arose before October 1 will remain governed by the rules in force at the time, where specifically provided for under those rules.
The 2026 order also supersedes the 2017 notice on interest on unpaid taxes and other earlier notices on the subject.
The ministry clarified that the reduction in the interest rate does not affect the 10 per cent penalty for late payment prescribed under Section 65 of the Nigeria Tax Administration Act.
Tax authorities also retain the power under Section 66 of the Act to waive penalty or interest where good cause is shown.
The government urged taxpayers to file their returns and pay applicable taxes on time.
It also advised taxpayers with outstanding liabilities to settle them promptly or engage the relevant tax authority, while urging them to check the Nigeria Revenue Service website for the applicable monthly rates.