The Federal Government has cut the interest charged on late payment of taxes, reducing the applicable spread on naira-denominated tax liabilities from five percentage points to one percentage point above the Central Bank of Nigeria’s (CBN) Monetary Policy Rate (MPR).
The new regime, which takes effect from October 1, 2026, is expected to lower the financing cost associated with delayed tax payments for businesses and individuals, while ensuring that the cost remains linked to prevailing market conditions.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, announced the change through the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, issued under Section 65 of the Nigeria Tax Administration Act, 2025.
Under the new order, interest on tax payable in naira will be charged at the MPR plus one percentage point, subject to a floor of the yield on 364-day Treasury Bills.
For foreign currency tax liabilities, interest will be charged at the Secured Overnight Financing Rate (SOFR) plus six percentage points. If SOFR is discontinued, its officially designated successor rate will apply.
The change gives businesses greater certainty in calculating the cost of outstanding tax liabilities, with the applicable rate to be reviewed monthly rather than being fixed indefinitely.
The rate for each calendar month will be determined on the last business day of the preceding month and published by the Nigeria Revenue Service (NRS) by the third business day of the month.
Interest will be calculated on a simple-interest basis and accrue daily from the tax due date until payment.
The new framework applies uniformly to self-assessment, the NRS, and State and FCT Internal Revenue Services.
For businesses, the reduction in the spread means that the additional interest burden on overdue naira tax obligations will now move more closely with monetary policy and government funding conditions.
Oyedele said the policy was designed to strike a balance between reducing uncertainty for taxpayers and discouraging the use of unpaid tax as a source of cheap financing.
‘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 added that tying the cost of late payment to market rates would ensure that delaying tax payments does not become cheaper than borrowing from the market.
Beyond the reduction in the interest spread, the government said the monthly publication of rates would improve transparency and enable taxpayers to determine their potential liabilities in advance.
‘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.
The order also provides transitional arrangements for outstanding tax liabilities.
The new rates will apply to interest arising from October 1, 2026, including interest on taxes that became due before that date. However, interest that arose before October 1 will remain governed by the rules applicable at the time, where specifically provided.
The order supersedes the 2017 notice on interest on unpaid taxes and other earlier notices on the subject.
The government stressed that the reduction in the interest rate does not affect the statutory 10 per cent penalty for late payment under Section 65 of the Act.
Tax authorities also retain the power under Section 66 to waive penalties or interest where good cause is established.
The Federal Government urged taxpayers with outstanding liabilities to settle them promptly or engage the relevant tax authority, while businesses and other taxpayers were advised to monitor the NRS website for the applicable monthly rates.