FG reduces interest on late tax payment

The Federal Government has reduced the interest charged on late payment of taxes, with the new rates taking effect from October 1, 2026.

The Minister of Finance and Coordinating Minister of the Economy, Mr Taiwo Oyedele, issued the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, under Section 65 of the Nigeria Tax Administration Act, 2025 Friday in Abuja.

Under the order, interest on tax payable in naira will be charged at the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus one percentage point. However, the applicable rate will not be lower than the yield on 364-day Treasury Bills.

The new provision represents a reduction from the previous five-percentage-point spread and is designed to align the cost of late tax payment more closely with prevailing market rates.

For taxes payable in foreign currency, the interest rate will be based on the Secured Overnight Financing Rate (SOFR), the benchmark for US dollar interest rates, plus six percentage points. An official successor rate will apply if SOFR is discontinued.

The interest rate will be reviewed monthly, with one rate applicable throughout each calendar month. The Nigeria Revenue Service (NRS) is required to publish the applicable rates on its website by the third business day of every month.

The order applies uniformly to self-assessments, the NRS, and state and Federal Capital Territory (FCT) internal revenue services. Interest will be calculated as simple interest on a daily basis, from the tax due date until payment.

Oyedele said the measure would prevent taxpayers from treating delayed tax payments as a cheaper source of credit than borrowing from the market.

“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,” he said.

The order does not affect the 10 per cent penalty for late payment. It also preserves the authority of relevant tax agencies to waive penalties or interest where good cause is established.

The new rates will apply to interest arising from October 1, including interest on taxes that became due before that date. However, interest accrued before the effective date will remain subject to the rules previously in force.