FG Cuts Late Tax Payment Interest, New Rate Takes Effect October 1
Pan Afric Reporters
The Federal Government has reduced the interest rate payable on late tax payments, replacing the previous five-percentage-point spread with a new market-linked formula designed to make the cost of delayed tax payments more predictable for taxpayers.
The development was contained in a press release issued by the Federal Ministry of Finance on Thursday, September 24, 2026, announcing the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, signed by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele. The new Order takes effect from October 1, 2026, and applies uniformly to the Nigeria Revenue Service as well as State and FCT Internal Revenue Services.
Under the new framework, interest on tax payable in naira will be charged at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point, subject to a floor of the yield on 364-day Treasury Bills. This represents a reduction from the previous five-percentage-point spread and is intended to align late-payment costs more closely with prevailing market rates.
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.
Explaining the rationale behind the reform, Oyedele said: “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 added that the Order would tie the cost of late payment to market conditions so that taxpayers would not have an incentive to delay payment as a cheaper alternative to borrowing.
The Minister also stressed the importance of certainty and uniformity in tax administration, saying: “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.” According to him, clear and predictable rules would make compliance easier and support a fairer tax system.
Under the Order, a single interest rate will apply for each calendar month, with the applicable rate determined on the last business day of the preceding month. The Nigeria Revenue Service is required to publish the rate on its website by the third business day of every month, while interest will be calculated as simple interest on a daily basis from the due date until payment.
The new rates will apply to interest arising from October 1, 2026, including interest on tax that became due before that date, while interest that arose before October 1 will remain governed by the rules applicable at the time. The Order supersedes the 2017 notice on interest on unpaid taxes and other earlier notices on the subject.
The Ministry clarified that the reform does not alter the 10 per cent penalty for late payment provided under Section 65 of the Nigeria Tax Administration Act, 2025. Tax authorities also retain the power under Section 66 of the Act to waive interest or penalties where good cause is established.
The Federal Government urged taxpayers to file returns and pay applicable taxes promptly, while those with outstanding liabilities were advised to settle them or engage the relevant tax authority. Taxpayers were also encouraged to monitor the Nigeria Revenue Service website for the applicable monthly interest rates.
