FG INTRODUCES MARKET-LINKED INTEREST RATE FOR LATE TAX PAYMENTS FROM OCTOBER

The Federal Government has introduced a new interest regime for late tax payments, linking the cost of delayed payments to prevailing market rates. 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 was issued under Section 65 of the Nigeria Tax Administration Act, 2025. It will take effect on October 1, 2026, replacing the 2017 notice and other previous notices on interest charged on unpaid taxes.

New Interest Rate for Naira Tax Payments

Under the new framework, interest on taxes payable in naira will be charged at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point. However, the applicable rate will be subject to a floor based on the yield of 364-day Treasury Bills. The new framework reduces the previous five-percentage-point spread. It also introduces a minimum rate to ensure that delayed tax payments do not cost taxpayers less than the government’s borrowing cost. For taxes payable in foreign currency, the applicable interest rate will be SOFR plus six percentage points. Where SOFR is discontinued, its officially designated successor rate will apply.

Monthly Rate Setting

The new regime will introduce monthly rate-setting. The applicable rate for each calendar month will be determined on the last business day of the preceding month. The Nigeria Revenue Service will publish the rate on its website by the third business day of each month. Interest will be calculated as simple interest on a daily basis. It will run from the date the tax becomes due until the date of payment.

FG Explains New Tax Interest Regime

Explaining the measure, Oyedele said delayed tax payments create a financing cost for government and the wider economy. “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 minister said linking late-payment charges to market rates is intended to prevent taxpayers from using unpaid taxes as a cheaper source of credit. He also said the framework is designed to improve certainty and consistency in tax administration. “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,” Oyedele said. 10% Late Payment Penalty Remains The Order applies to self-assessment arrangements, the Nigeria Revenue Service, and State and FCT Internal Revenue Services. The Federal Government said the new rates will apply to interest arising from October 1, 2026. This includes interest on tax liabilities that became due before that date. However, interest that arose before October 1 will remain governed by the rules applicable when it arose, where those rules specifically provide for it. The new Order does not change the 10 per cent penalty for late payment prescribed under Section 65 of the Nigeria Tax Administration Act. Tax authorities will also retain powers under Section 66 to waive interest or penalties where taxpayers demonstrate good cause. The framework therefore separates the two financial consequences of late payment. The statutory 10 per cent default penalty remains unchanged, while the interest component will now move with specified market benchmarks.

FG Urges Taxpayers to Pay Promptly

The Federal Government urged taxpayers with outstanding liabilities to settle them promptly or engage the relevant tax authority. It also advised taxpayers to file returns and make payments within the prescribed deadlines. According to Oyedele, the new framework establishes a market-linked cost for tax arrears. The stated objective is to reduce incentives to defer tax payments while providing taxpayers with a predictable monthly basis for calculating their liabilities.