FG Cuts Late Tax Interest Spread From 5% to 1% Above Monetary Policy Rate
The Federal Government has reduced the interest rate applicable to late payment of taxes, with the new regime set to take effect from October 1, 2026.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, announced the issuance of the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, pursuant to Section 65 of the Nigeria Tax Administration Act, 2025.
Under the new 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, subject to a minimum rate linked to the yield on 364-day Treasury Bills.
The new provision represents a reduction from the previously applicable five-percentage-point spread.
For tax liabilities payable in foreign currency, the interest rate will be based on the Secured Overnight Financing Rate (SOFR) plus six percentage points. Where SOFR is discontinued, its officially designated successor rate will apply.
The Federal Government said the new framework is designed to align the cost of late tax payments more closely with prevailing market rates while providing taxpayers with greater certainty and predictability.
The applicable rate will be determined once every calendar month, based on the last business day of the preceding month. The Nigeria Revenue Service (NRS) is required to publish the applicable rates on its website by the third business day of each month.
Interest will be calculated as simple interest on a daily basis, beginning from the tax due date until the date of payment.
The Order applies to self-assessment by taxpayers, the Nigeria Revenue Service, as well as State and Federal Capital Territory Internal Revenue Services.
Commenting on the new policy, Oyedele said the cost of late tax payment should reflect the cost to government of delayed revenue.
“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. 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 Minister said.
He added that the framework would provide taxpayers with greater clarity because the applicable rate would be published monthly and applied uniformly.
“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. Clear rules make compliance easier and support a fair, predictable tax system,” Oyedele said.
The Federal Government clarified that the new rates will apply to interest arising from October 1, 2026, including interest on tax that became due before that date.
However, interest that arose before October 1, 2026, will not be affected where it was specifically provided for under the rules in force at the time.
The new Order also supersedes the 2017 notice on interest on unpaid taxes and other earlier notices on the subject.
The government stated that the new arrangement does not alter the 10 per cent penalty for late payment prescribed under Section 65 of the Nigeria Tax Administration Act.
Tax authorities also retain the power under Section 66 of the Act to waive penalty or interest where good cause is established.
The government advised taxpayers to file their returns and pay applicable taxes promptly, while regularly checking the Nigeria Revenue Service website for the monthly applicable interest rates.
Taxpayers with outstanding liabilities were also encouraged to settle them promptly or engage the relevant tax authority.
