FG Cuts Late Tax Interest, New Rates Begin October 1

The Federal Government has reduced the interest charged on late payment of taxes, with the new regime taking effect from October 1, 2026.

The change 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, made under Section 65 of the Nigeria Tax Administration Act, 2025, links interest on overdue tax payments to prevailing market rates. It also applies across federal, state and Federal Capital Territory tax authorities.

Under the new framework, taxpayers with naira-denominated liabilities will pay interest at the Central Bank of Nigeria’s Monetary Policy Rate(MPR) plus one percentage point.

That represents a reduction from the previous five-percentage-point margin. However, the applicable rate cannot fall below the yield on 364-day Treasury Bills.

For tax liabilities payable in foreign currency, the interest rate will stand at the Secured Overnight Financing Rate(SOFR) plus six percentage points.

The ministry said the applicable rate will change monthly. The Nigeria Revenue Service(NRS) must publish each month’s rate on its website by the third business day.

The new framework also provides for daily simple-interest calculations. The calculation will run from the date the tax becomes due until the taxpayer settles the outstanding liability.

Explaining the rationale, Oyedele said late tax payments could force the government to borrow to cover revenue gaps. He argued that taxpayers should not enjoy cheaper credit by withholding money owed to the government.

“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,” the minister said.

He added that linking the charge to market rates would prevent delayed tax payments from becoming a cheaper source of financing than borrowing from the market.

Oyedele also stressed that the order would make the tax system more predictable. According to him, taxpayers will know the applicable rate in advance and can access the figure through monthly publications by the NRS.

“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 stated.

The new rates will apply 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 that applied when it accrued.

The order also replaces the 2017 notice on interest for unpaid taxes and other earlier notices covering the issue.

However, the government clarified that the change does not affect the statutory 10 per cent penalty for late payment under Section 65 of the Nigeria Tax Administration Act.

Tax authorities also retain the power under Section 66 of the Act to waive interest or penalties where taxpayers establish sufficient grounds.

The minister urged taxpayers to file their returns and settle their tax obligations within the prescribed deadlines. He also advised those with outstanding liabilities to pay promptly or engage the relevant tax authority.

The government said the revised framework is intended to give taxpayers greater certainty while ensuring that delayed tax payments carry a cost linked to the government’s own financing conditions.