The federal government has lowered the interest rate charged on late payment of tax in naira from the previous five-percentage-point spread to one percentage point above the Central Bank of Nigeria’s Monetary Policy Rate, with the new regime taking effect from 1 October 2026.
The Minister of Finance and Coordinating Minister of the Economy, Mr 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.
The new order, released in a press statement from the Ministry of Finance stated that interest on tax payable in naira will be charged at the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus one percentage point.
This represents a drop from the previous five-percentage-point spread.
However, the statement said the applicable rate will not fall below the yield on 364-day Treasury Bills, reflecting the cost to government of funding itself when taxes are paid late.
For taxes payable in foreign currency, the interest rate will be the Secured Overnight Financing Rate (SOFR), the international benchmark for US dollar interest rates, plus six percentage points, while SOFR is discontinued, its official successor rate will apply.
The Federal Ministry of Finance said the new order was designed to align the cost of late tax payment more closely with prevailing market rates while providing taxpayers with greater certainty about their obligations.
The Nigeria Revenue Service has also been directed to publish the applicable interest rates on its website by the third business day of every month.
Under the new arrangement, one rate will apply throughout each calendar month, with the rate determined on the last business day of the preceding month.
Explaining the rationale behind the policy, Oyedele said taxes due to government were public funds and that delays in payment could force government to borrow to cover funding gaps.
“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 added that the new system would ensure that taxpayers could not benefit financially by withholding taxes that were already due.
“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.
He said the policy would also provide greater certainty and consistency for taxpayers across the country.
“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,” he said.
“Clear rules make compliance easier and support a fair, predictable tax system,” he added.
The new interest regime will apply to interest arising from 1 October 2026, including interest on tax liabilities that became due before that date.
However, interest that arose before 1 October will not be affected where it is specifically governed by the rules that were in force at the time.
The 2026 order also supersedes the 2017 notice on interest on unpaid taxes and any other earlier notices dealing with the issue, according to the statement.
The Ministry also clarified that the new order does not alter the 10 per cent penalty applicable to late payment under Section 65 of the Nigeria Tax Administration Act.
