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The Federal Government has reduced the additional interest margin charged on unpaid naira-denominated taxes, linking the cost of late payment more closely to prevailing borrowing conditions.
Under the new framework taking effect on October 1, 2026, interest on outstanding naira tax liabilities will be charged at the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus one percentage point, subject to a minimum rate tied to the yield on 364-day Treasury Bills.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, issued the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, according to a statement from the Federal Ministry of Finance.
The new order reduces the additional margin above the MPR from five percentage points to one percentage point, while maintaining a minimum rate based on the government’s domestic borrowing costs.
Explaining the rationale for linking late tax payments to borrowing costs, Oyedele said, “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.
“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.”
New tax interest framework takes effect October 1
The ministry said the order was issued pursuant to Section 65 of the Nigeria Tax Administration Act, 2025, and will apply uniformly across federal, state and Federal Capital Territory tax authorities.
For taxes payable in naira, the applicable interest rate will be the MPR plus one percentage point. However, the rate cannot fall below the yield on 364-day Treasury Bills.
According to the ministry, the Treasury Bill benchmark reflects the cost to the government of funding itself when tax revenues are not received on time.
For foreign-currency tax obligations, interest will be calculated using the Secured Overnight Financing Rate (SOFR), the benchmark for US dollar-denominated borrowing, plus six percentage points.
Where SOFR is discontinued, its officially designated successor rate will be used.
The framework introduces a single interest rate for each calendar month. The applicable rate will be determined on the last business day of the preceding month and published by the Nigeria Revenue Service by the third business day of every month.
Interest calculated daily on unpaid tax
Interest under the new framework will accrue daily on a simple-interest basis, beginning from the date a tax liability becomes due until the outstanding amount is paid.
The rates will cover self-assessment obligations and taxes administered by the Nigeria Revenue Service, as well as tax liabilities managed by state and FCT internal revenue services.
The government said the approach would provide taxpayers with greater certainty over the financial consequences of delayed tax payments by establishing a predictable and publicly available monthly rate.
Oyedele said taxpayers would be able to determine the applicable rate in advance rather than face uncertainty over how interest would be calculated.
“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.”
New rates apply to interest arising from October
The ministry said the new rates would apply to interest arising from October 1, including interest relating to taxes that became due before the effective date.
However, interest that accrued before October 1 will remain governed by the rules that applied during the period in which it arose.
The 2026 order supersedes the 2017 notice on interest on unpaid taxes, along with other earlier notices governing the issue.
The ministry also clarified that the new framework does not change the 10% penalty for late payment provided under Section 65 of the Nigeria Tax Administration Act.
Tax authorities will continue to retain powers under Section 66 to waive penalties or interest where taxpayers can demonstrate good cause.
Government urges timely tax compliance
The Federal Ministry of Finance advised taxpayers to file their returns and settle applicable liabilities within the required deadlines.
Taxpayers with outstanding obligations were also encouraged to make prompt payments or engage the relevant tax authority to address their liabilities.
By tying interest on delayed tax payments to market-based benchmarks, the government said the framework is intended to provide greater consistency in the administration of tax interest while reflecting the financial cost associated with delayed revenue collection.
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