FG REDUCES INTEREST RATE ON LATE TAX PAYMENTS, NEW ORDER TAKES EFFECT OCTOBER 1
The Federal Government has reduced the interest rate applicable to late payment of taxes, with the new regime taking effect from October 1, 2026.
The measure is contained in the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, issued by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele.
The Order, issued pursuant to Section 65 of the Nigeria Tax Administration Act, 2025, is designed to align the cost of late tax payments more closely with prevailing market rates. It will apply uniformly to taxpayers under the Nigeria Revenue Service as well as State and Federal Capital Territory (FCT) Internal Revenue Services.
Under the new framework, interest on tax payable in naira will be charged at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point. The new rate represents a reduction from the previously applicable five-percentage-point spread, but will not fall below the yield on 364-day Treasury Bills.
For taxes payable in foreign currency, interest will be charged at the Secured Overnight Financing Rate (SOFR) plus six percentage points. Where SOFR is discontinued, its officially designated successor rate will apply.
The Order provides for one applicable rate for each calendar month, with the rate set on the last business day of the preceding month. The Nigeria Revenue Service is required to publish the applicable rate on its website by the third business day of each month.
Interest will be calculated as simple interest on a daily basis, beginning from the due date until the tax is paid. The new rates will apply to interest arising from October 1, 2026, including interest on tax that became due before that date, while interest that arose before the effective date will remain subject to the rules applicable at the time.
The Federal Ministry of Finance said the Order supersedes the 2017 notice on interest on unpaid taxes and other earlier notices on the subject.
However, it does not alter the 10 per cent penalty for late payment prescribed under Section 65 of the Nigeria Tax Administration Act, while tax authorities retain powers under Section 66 to waive penalty or interest where good cause is established.
Oyedele said the new framework would provide taxpayers with greater certainty and ensure that delaying tax payments does not become a cheaper source of credit than borrowing from the market.
The ministry advised taxpayers to file their returns and pay applicable taxes on time, while those with outstanding liabilities were urged to settle them promptly or engage the relevant tax authority.
