Business
FG cuts interest on late tax payments
…New rate takes effect October 1
…Applies to FG, states, FCT tax authorities
By Emma Ujah, Abuja Bureau Chief
ABUJA — The Federal Government has reduced the interest rate payable by taxpayers for late settlement of their tax liabilities, with the new regime taking effect from October 1, 2026.
Under the new arrangement, interest on tax liabilities payable in naira will be pegged to the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus one percentage point, down from the previous five-percentage-point spread.
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, Mr Taiwo Oyedele, pursuant to Section 65 of the Nigeria Tax Administration Act, 2025.
Oyedele said the new order would apply uniformly to taxpayers dealing with federal, state and Federal Capital Territory tax authorities.
However, the applicable naira interest rate will not fall below the yield on 364-day Treasury Bills, reflecting the Federal Government’s cost of borrowing when tax payments are delayed.
For tax liabilities payable in foreign currency, the interest rate will be based on the Secured Overnight Financing Rate (SOFR) plus six percentage points.
The order provides that where SOFR is discontinued, its officially designated successor rate will be adopted.
Explaining the rationale for the new regime, Oyedele said the objective was to link the cost of delaying tax payments more closely to prevailing market conditions while giving taxpayers greater certainty about their obligations.
He 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.
“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 the reform was also intended to promote fairness and predictability in tax administration.
He added: “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.”
Under the new framework, only one interest rate will apply in each calendar month, while the Nigeria Revenue Service (NRS) is required to publish the applicable rate on its website by the third business day of every month.
The new rates will apply to interest arising from October 1, 2026, including interest relating to tax liabilities that became due before that date.
However, interest that accrued before October 1 will remain governed by the rules applicable at the time, to the extent provided under the existing regime.
The order also supersedes the 2017 notice on interest on unpaid taxes and other earlier notices dealing with the matter.
The Federal Government clarified that the new order does not alter the 10 per cent penalty for late payment imposed 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 a taxpayer establishes good cause.
The government urged taxpayers to file their returns and pay their tax liabilities promptly, while advising those with outstanding obligations to settle them or engage the relevant tax authority.
Taxpayers were also advised to regularly check the NRS website for the applicable monthly interest rate.
The measure is part of ongoing tax administration reforms aimed at providing clearer and more predictable rules for taxpayers while strengthening compliance and public revenue collection.
