The Federal Government has introduced a new market-linked interest regime for late payment of taxes, with the cost of naira-denominated tax arrears to be tied to the Central Bank of Nigeria’s Monetary Policy Rate from October 1, 2026.
The new framework, issued by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, replaces the existing five-percentage-point spread with MPR plus one percentage point, subject to a minimum rate based on the yield on 364-day Treasury Bills.
The measure is contained in the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, issued pursuant to Section 65 of the Nigeria Tax Administration Act, 2025.
Oyedele said the change was designed to reflect the financing cost to government when taxpayers delay paying taxes.
“Tax that is due belongs to the public. When it is paid late, the Government may have to borrow to fill the gap, and the cost falls on everyone,” the minister said.
He said linking late-payment charges to market rates would prevent taxpayers from effectively using unpaid taxes as a cheaper source of credit.
Under the new regime, the applicable interest rate will be determined monthly, with one rate applying throughout each calendar month.
The rate for each month will be set on the last business day of the preceding month, while the Nigeria Revenue Service will publish the applicable figure on its website by the third business day of the month.
Interest will be calculated daily on a simple-interest basis, running from the date the tax becomes due until payment.
The framework applies to self-assessment arrangements and tax obligations administered by the Nigeria Revenue Service, state revenue services and the Federal Capital Territory.
For taxes payable in foreign currency, interest will be charged at the Secured Overnight Financing Rate plus six percentage points. If SOFR is discontinued, its officially designated successor rate will apply.
The new rates will apply to interest arising from October 1, including interest relating to tax liabilities that became due before that date.
However, interest that accrued before October 1 will remain subject to the rules applicable at the time.
The new order supersedes the 2017 notice and other earlier notices governing interest on unpaid taxes.
The Federal Government clarified that the reform does not affect the separate 10 per cent penalty for late payment provided under the Nigeria Tax Administration Act.
Tax authorities will also retain the power to waive penalties or interest where a taxpayer establishes good cause.
The new framework therefore changes the interest component of late tax payments while leaving the statutory late-payment penalty in place.
Oyedele said the system would also give taxpayers greater certainty because the applicable rate would be published monthly and applied consistently across the country’s tax authorities.
The Federal Government has advised taxpayers to file their returns and settle their tax obligations on time.
Those with outstanding liabilities have also been urged to settle them promptly or engage the relevant tax authority to address their obligations.
