FG Revises Late Tax Interest Charges As New Rates Begin October 1

By Opeyemi Adelakun

The Federal Government has announced a new framework for calculating interest on unpaid taxes, reducing the additional charge on naira-denominated liabilities and setting October 1, 2026, as the commencement date.

The Federal Ministry of Finance announced the change on Thursday, September 24, following the issuance of the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele.

Under the revised arrangement, interest on taxes payable in naira will be determined using the Central Bank of Nigeria’s Monetary Policy Rate (MPR), with an additional one percentage point. The previous margin was five percentage points.

The ministry said the applicable rate would not be permitted to fall below the yield on 364-day Treasury Bills.

The order was issued under Section 65 of the Nigeria Tax Administration Act, 2025. It is designed to establish a uniform approach for tax authorities at the federal, state and Federal Capital Territory levels.

“For tax payable in Naira, interest is charged at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point. This is a reduction from the spread of five percentage point previously applicable but the rate will not fall below the yield on 364-day Treasury Bills, which reflects what it costs Government to fund itself when taxes are paid late,” the ministry stated.

For tax obligations denominated in foreign currencies, the new order provides for interest to be calculated using the Secured Overnight Financing Rate (SOFR), a benchmark for US dollar financing, plus six percentage points.

The ministry added that if SOFR is discontinued, the officially recognised replacement benchmark would be used instead.

To make the charges predictable, the order stipulates that one rate will apply throughout each calendar month. The Nigeria Revenue Service is to publish the relevant rate on its website no later than the third business day of the month.

Interest will accrue daily and be calculated on a simple-interest basis, beginning on the tax payment deadline and continuing until the amount owed is paid.

Oyedele said the revised system was intended to reflect the government’s cost of financing revenue shortfalls caused by delayed tax payments.

“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 said.

He also said publishing the monthly rates and applying a common method across tax authorities would help taxpayers understand their obligations and know how interest would be assessed.

“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,” Oyedele added.

The ministry clarified that the new rates would cover interest arising from October 1, 2026, including interest on tax liabilities whose original payment dates fell before that day.

However, interest that accrued before the commencement date would remain governed by the rules applicable when it arose, where those earlier provisions specifically covered it.

The 2026 order also replaces the 2017 notice on interest charged on unpaid taxes, as well as any other previous notices dealing with the matter.

Despite the reduction in the interest margin for naira liabilities, the ministry said the 10 per cent penalty for late payment under Section 65 of the Act had not been changed.

It further noted that Section 66 empowers the relevant tax authorities to waive interest or penalties where a taxpayer demonstrates good cause.

The ministry urged taxpayers to submit returns and pay their taxes within the stipulated deadlines. Those with outstanding liabilities were advised to clear them promptly or contact the appropriate tax authority to discuss their obligations.