FG slashes interest rate on late tax payment

By Emma Ujah, Abuja Bureau Chief

The Federal Government (FG) has reduced the penalty interest rate for late settlement of 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 (CBN) Monetary Policy Rate (MPR) plus one percentage point, down from the previous five-percentage-point penalty.

The measure is contained in the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, issued yesterday 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.

According to the minister, the new Order will apply uniformly to taxpayers dealing with federal, state and Federal Capital Territory (FCT) tax authorities.

However, the applicable interest rate on naira-denominated tax liabilities 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 currencies, interest will be charged at the Secured Overnight Financing Rate (SOFR) plus six percentage points.

The Order further provides that where SOFR is discontinued, its officially designated successor rate will apply.

Explaining the rationale for the new regime, Oyedele said the objective was to align the cost of late tax payments more closely with prevailing market conditions while providing taxpayers with greater certainty about their obligations.

“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,” he stated.