The Federal Government has introduced a new tax order that reduces the interest charged when taxpayers fail to pay their taxes on time.
The Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, signed by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, will take effect from October 1, 2026. It is issued under Section 65 of the Nigeria Tax Administration Act, 2025. (Channels Television)
The new order links the cost of late tax payments more closely to prevailing market rates, giving taxpayers greater certainty about how much interest they may incur.
For taxes payable in naira, the interest rate will be based on the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus one percentage point. This represents a reduction from the previous five-percentage-point spread.
However, the applicable rate cannot fall below the yield on 364-day Treasury Bills, which reflects the government’s cost of borrowing when tax payments are delayed. (FRCN North Central)
For taxes payable in foreign currency, the interest will be calculated using the Secured Overnight Financing Rate (SOFR), an international benchmark for US dollar interest rates, plus six percentage points. If SOFR is discontinued, its official successor rate will be used.
The Nigeria Revenue Service (NRS) will publish the applicable interest rates for each calendar month on its website by the third business day of that month.
Explaining the reason behind the new system, Oyedele said delayed tax payments could create additional costs for 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.”
He said the new arrangement would ensure that delaying tax payments would not become a cheaper alternative to borrowing money from the market.
Oyedele also stressed the importance of having a predictable system that allows taxpayers to know in advance how much interest they could face.
“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.”
New Rates and Previous Tax Debts
The new rates will apply to interest arising from October 1, 2026, including interest relating to taxes that became due before that date.
However, interest that arose before October 1 will remain governed by the rules that were applicable at the time, where those rules specifically provide for it.
The 2026 order also replaces the 2017 notice on interest charged on unpaid taxes, along with other previous notices covering the same issue.
The new order does not change the existing 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 sufficient reason is established.
FG Advises Taxpayers
Oyedele urged taxpayers to file their returns and pay their applicable taxes on time to avoid additional costs.
He also advised people with outstanding tax liabilities to settle them promptly or engage the relevant tax authority, while encouraging taxpayers to check the NRS website regularly for the applicable monthly interest rates.
