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The Federal Government is replacing the five-percentage-point spread on late tax payments with a one-percentage-point spread above the CBN’s MPR.
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Naira tax liabilities will also be subject to a floor based on the 364-day Treasury Bill yield, while foreign-currency obligations will attract SOFR plus six percentage points.
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The new regime takes effect October 1 and applies to federal, state and FCT tax authorities, with rates to be published monthly.
September 24, (THEWILL) – The Federal Government has reduced the interest charged on late payment of taxes, replacing the existing five-percentage-point spread with a market-linked formula that will take effect from October 1, 2026.
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, under Section 65 of the Nigeria Tax Administration Act, 2025.
Naira tax interest tied to MPR
Under the new framework, interest on tax liabilities payable in naira will be charged at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point, down from the previous five-percentage-point spread.
However, the applicable rate cannot fall below the yield on 364-day Treasury Bills. The government said the floor reflects its own cost of funding when tax payments are delayed.
For tax liabilities denominated in foreign currency, interest will be based on the Secured Overnight Financing Rate, or SOFR, plus six percentage points. If SOFR is discontinued, its officially recognised successor will apply.
The order provides for a single interest rate for each calendar month.
The applicable rate will be determined on the last business day of the preceding month, while 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 daily, running from the date the tax becomes due until payment.
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The new framework applies to self-assessment taxpayers as well as tax liabilities administered by the Nigeria Revenue Service, state Internal Revenue Services and the Federal Capital Territory tax authority.
Oyedele said the reform was designed to prevent taxpayers from using delayed tax payments as a cheaper source of financing than borrowing at prevailing market rates.
“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 the new formula would also provide greater certainty by allowing taxpayers to know the applicable rate in advance.
The government clarified that the new rates will apply to interest arising from October 1, including interest on tax liabilities that became due before that date. Interest that accrued before October 1 will remain subject to the rules applicable at the time.
The 2026 Order supersedes the 2017 notice on interest for unpaid taxes and other earlier notices on the subject.
However, the separate 10 percent penalty for late payment under Section 65 of the Nigeria Tax Administration Act remains unchanged.
Tax authorities also retain the power under Section 66 to waive interest or penalties where sufficient cause is established.
The government urged taxpayers with outstanding liabilities to settle them or engage the relevant tax authority, while advising taxpayers to monitor the NRS website for monthly applicable interest rates.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
