FG Slashes Late Tax Interest Rates from October 1, Ties Them to Market Benchmarks
Abuja, Nigeria—September 24, 2026—The Federal Government has reduced the interest charged on late tax payments and tied the rates more closely to prevailing market conditions, with the new regime taking effect from October 1, 2026.
In a statement released Thursday, the Ministry of Finance announced 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.
The order was issued under Section 65 of the Nigeria Tax Administration Act, 2025, and replaces earlier frameworks, including the 2017 notice.
New Rates Explained
For taxes payable in naira, interest will now be charged at the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus one percentage point.
This marks a significant reduction from the previous five-percentage-point spread. However, the rate will not fall below the yield on 364-day Treasury Bills, reflecting the cost to the government of borrowing when taxes arrive late.
For taxes payable in foreign currency, interest will be calculated at the Secured Overnight Financing Rate (SOFR) — the international dollar benchmark — plus six percentage points. If SOFR is discontinued, its officially recognised successor rate will apply.
The applicable rate for each calendar month will be determined on the last business day of the preceding month and published by the Nigeria Revenue Service on its website by the third business day of the month. Interest will accrue as simple interest on a daily basis from the due date until the liability is fully settled.
Why the Change?
Oyedele explained that the reform aims to stop taxpayers from treating unpaid taxes as a cheaper source of credit than borrowing from the market.
“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.
“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.”
The new rates apply to interest arising from October 1, 2026—including interest on tax liabilities that became due before that date.
Interest that had already accrued before October 1 will continue under the previous rules where specifically provided. The existing 10 percent penalty under the Act remains unchanged.
Who Is Affected?
The framework covers taxes administered by the Nigeria Revenue Service, state internal revenue services, and the Federal Capital Territory tax authority. It applies to both self-assessment and other arrangements.
Tax authorities retain the power under Section 66 of the Act to waive penalties or interest where good cause is shown. Officials have advised taxpayers to file returns promptly and settle outstanding liabilities to avoid the new charges.
The move forms part of broader efforts to modernize Nigeria’s tax administration, improve compliance, and align the cost of delayed payments with actual market conditions.
As the October 1 start date approaches, businesses and individuals with outstanding tax obligations are expected to review their positions carefully.
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