Taxpayers Take Note: FG Introduces New Interest Regime For Late Payments

The Federal Government has introduced a new interest regime for late tax payments, with the revised framework taking effect from October 1, 2026.

According to Bush Radio Academy, the new arrangement will reduce the interest spread on naira-denominated tax liabilities from the previous five percentage points above the applicable rate to the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus one percentage point.

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.

Under the new framework, the interest rate for taxes payable in naira will be subject to a minimum floor based on the yield of 364-day Treasury Bills. The government said the provision is intended to reflect the cost of borrowing when delayed tax payments create a funding gap.

For tax liabilities payable in foreign currencies, the applicable interest will be calculated using the Secured Overnight Financing Rate (SOFR) plus six percentage points. If SOFR is discontinued, its officially recognised successor benchmark will be used.

The new regime will apply to taxpayers dealing with the Nigeria Revenue Service, state internal revenue services and the Federal Capital Territory Internal Revenue Service, providing a common framework for calculating interest on late tax payments across the country.

The applicable interest rate will be determined monthly based on prevailing benchmark rates and published by the Nigeria Revenue Service by the third business day of each month. Interest will be calculated as simple interest on a daily basis, beginning from the date the tax becomes due until the outstanding liability is settled.

Oyedele said the revised system was designed to bring the cost of delaying tax payments closer to prevailing market conditions and provide taxpayers with greater certainty about their financial obligations.

The minister explained that when taxes are paid late, the government may need to borrow to cover the resulting funding gap, creating additional costs for the public.

“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,” Oyedele said.

He added that linking late-payment interest to market rates would prevent taxpayers from effectively using unpaid taxes as a cheaper source of financing than borrowing from the market.

The government also clarified that the new order does not remove the separate 10 per cent penalty for late payment provided under Section 65 of the Nigeria Tax Administration Act.

The new rates will apply to interest arising from October 1, 2026, including interest on tax liabilities that became due before that date. However, interest that arose before October 1 will remain subject to the rules applicable when it arose, where those rules specifically provided for such charges.

The order supersedes the 2017 notice and other earlier notices governing interest on unpaid taxes. The government has advised taxpayers to meet their tax obligations within the stipulated deadlines and encouraged those with outstanding liabilities to settle them promptly or engage the relevant tax authority.