FG cuts interest rate on late tax payments from October

The Federal Government has issued the Nigeria Tax Administration Order 2026, reducing the interest charged on late tax payments and linking the rate more closely to prevailing market conditions.

The order, signed by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, will take effect on 1 October 2026, according to a statement by the Federal Ministry of Finance.

It applies where taxes are not paid when due under section 65 of the Nigeria Tax Administration Act 2025.

Under the new arrangement, interest on tax payable in naira will be calculated at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point.

Oyedele said the margin had been reduced from the previous five percentage points. However, the applicable rate cannot fall below the yield on 364-day Treasury Bills, which the government says reflects its borrowing costs when tax revenues are delayed.

For taxes payable in foreign currencies, interest will be charged at the Secured Overnight Financing Rate (SOFR), an international benchmark for US dollar borrowing, plus six percentage points. If SOFR is discontinued, its official successor will be used.

The Nigeria Revenue Service has been directed to publish the applicable rates on its website by the third business day of every month.

Oyedele said the changes were intended to make the cost of delayed tax payments more predictable while ensuring taxpayers did not gain a financial advantage by withholding money due to the government.

“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 said.

He added that the system would provide greater certainty because taxpayers dealing with either the Nigeria Revenue Service or state revenue authorities would be able to know the applicable rate in advance.

The new rates will apply to interest arising from 1 October, including on taxes that became due before that date. Interest accrued before 1 October will remain subject to the rules applicable at the time.

The order replaces the 2017 notice on interest on unpaid taxes and other previous notices on the issue.

It does not alter the 10% penalty for late payment provided under section 65 of the Act. Tax authorities will also retain the power under section 66 to waive penalties or interest where sufficient grounds are established.

Oyedele urged taxpayers to file returns and pay taxes when due, while those with outstanding liabilities were advised to settle them promptly or contact the relevant tax authority.