FG Introduces Market-Linked Interest On Late Tax Payments From October 1

The federal government has introduced a new framework for calculating interest on late payment of taxes, with the charges to be linked to prevailing market rates from October 1, 2026.

The new framework 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, Taiwo Oyedele, pursuant to Section 65 of the Nigeria Tax Administration Act, 2025.

Under the order, interest on tax liabilities payable in naira will be charged at the Central Bank of Nigeria’s (CBN) Monetary Policy Rate (MPR) plus one percentage point.

However, the applicable rate will not fall below the yield on 364-day Treasury Bills.

The new formula represents a reduction from the five percentage points previously added to the applicable benchmark rate for late tax payments.

For tax liabilities payable in foreign currencies, the interest rate will be the Secured Overnight Financing Rate (SOFR), an international benchmark for US dollar interest rates, plus six percentage points.

If SOFR is discontinued, an officially designated successor rate will be used.

Under the new framework, a single interest rate will apply for each calendar month. The rate will be determined using the applicable benchmark on the last business day of the preceding month.

The Nigeria Revenue Service (NRS) is required to publish the applicable rate on its website by the third business day of each 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 fully paid.

The new rates will apply to self-assessment tax liabilities as well as assessments administered by the NRS, State Internal Revenue Services and the Federal Capital Territory Internal Revenue Service.

Explaining the rationale for the new framework, Oyedele said late payment of taxes could leave the government with funding gaps that may require borrowing.

“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 uniform approach would also give taxpayers greater certainty, as the applicable rate would be published monthly and applied consistently across tax authorities.

“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,” he said.

The Federal Ministry of Finance, however, clarified that the new order does not abolish the existing 10 per cent penalty for late payment prescribed under Section 65 of the Nigeria Tax Administration Act.

Consequently, taxpayers who fail to pay their taxes when due may be liable for both the 10 per cent penalty and the applicable market-linked interest.

However, tax authorities retain the power under Section 66 of the Act to waive penalties or interest where a taxpayer is able to demonstrate good cause.

The new rates will apply to interest arising from October 1, including interest on tax liabilities that became due before that date.

Interest that accrued before October 1, however, will remain subject to the rules that were applicable at the time.

The 2026 order also supersedes the 2017 notice on interest on unpaid taxes and other previous notices on the subject.

The ministry advised taxpayers with outstanding tax liabilities to settle them promptly or engage the relevant tax authority.

It also urged taxpayers to monitor the monthly rates published by the NRS and meet their filing and payment obligations within the stipulated deadlines.

The new framework is part of the federal government’s ongoing tax reforms following the enactment of four tax laws in 2025.

The laws, which came into effect in January 2026, include the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service (Establishment) Act and Joint Revenue Board (Establishment) Act.