FG Slashes Late Tax Payment Interest Rate

By Adedapo Adesanya

The federal government has trimmed the interest rate charged on late tax payments, linking interest on Naira-denominated tax liabilities to the Central Bank of Nigeria’s Monetary Policy Rate (MPR).

The new framework, which takes effect from October 1, 2026, is contained in the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, issued under Section 65 of the Nigeria Tax Administration Act, 2025.

Under the new regime, interest on tax liabilities payable in Naira will be charged at the CBN MPR plus one percentage point, subject to a floor based on the yield on 364-day Treasury Bills.

For tax liabilities payable in foreign currencies, the applicable interest rate will be the Secured Overnight Financing Rate (SOFR) plus six percentage points. Where SOFR is discontinued, its officially designated successor rate will apply.

The Minister of Finance and Coordinating Minister of the Economy, Mr Taiwo Oyedele, said the revised framework was designed to align the cost of delayed tax payments with prevailing market conditions.

The order replaces the previous five-percentage-point spread and provides for monthly reviews of the applicable rates.

The Nigeria Revenue Service (NRS) is required to publish the applicable rate on its website by the third business day of every month, with a single rate applying throughout each calendar 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.

The framework covers taxpayers under self-assessment, as well as tax liabilities administered by the Nigeria Revenue Service and the State and Federal Capital Territory Internal Revenue Services.

Mr Oyedele said the revised system would provide greater certainty for taxpayers while ensuring that the cost of delayed payments reflects the financial implications to government of not receiving revenue when due.

The minister explained that when taxes are paid late, government may have to borrow to bridge the resulting funding gap, with the associated cost ultimately borne by the public.

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 accrued before October 1 will remain subject to the rules applicable at the time, where provided under the relevant regulations.

The order supersedes the 2017 notice on interest on unpaid taxes and other previous notices covering the subject.

The government clarified that the reform does not affect the 10 per cent late-payment penalty provided under Section 65 of the Nigeria Tax Administration Act.

Tax authorities also retain the power under Section 66 of the Act to waive applicable penalties or interest where good cause is established.

The Federal Ministry of Finance advised taxpayers to file their returns and settle their tax obligations promptly, while those with outstanding liabilities were encouraged to settle them or engage the relevant tax authority.

Earlier this week, the central bank made a 350 basis points cut to benchmark interest rates to 23 per cent from 26.50 per cent.