FG REDUCES INTEREST RATE ON LATE TAX PAYMENTS FROM OCTOBER 1
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By ‘Balogun Ibrahim
The Federal Government has reduced the interest rate charged on late payment of taxes, with the new regime set to take effect from October 1, 2026.
The Federal Ministry of Finance announced this in a statement issued in Abuja on Thursday, September 24, 2026, 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 new regulation, interest on tax liabilities payable in naira will be calculated using the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point.
This represents a reduction from the previous five-percentage-point margin.
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However, the applicable rate will not be lower than the yield on 364-day Treasury Bills.
The ministry said the order was issued pursuant to Section 65 of the Nigeria Tax Administration Act, 2025, and would apply uniformly to tax authorities at the federal, state and Federal Capital Territory levels.
For tax liabilities denominated in foreign currency, interest will be charged at the Secured Overnight Financing Rate (SOFR), the benchmark for US dollar interest rates, plus six percentage points.
The ministry added that should SOFR be discontinued, its officially designated successor rate would be used.
It explained that a single rate would apply for each calendar month, with the Nigeria Revenue Service required to publish the applicable rate on its website by the third business day of every month.
Interest will be calculated as simple interest on a daily basis, beginning from the date the tax becomes due until the outstanding amount is paid.
Explaining the rationale behind the new policy, Oyedele said taxes owed to the government represent public funds and that delayed payments could force the government to borrow to cover funding gaps.
He said linking late-payment interest to prevailing market rates would ensure that delaying tax payments would not become a cheaper financing option than borrowing from the market.
The minister also stressed the importance of predictability, noting that taxpayers dealing with either the Nigeria Revenue Service or state revenue authorities would know the applicable rate in advance and be charged under the same framework.
According to the ministry, the new rates will apply to interest accruing from October 1, 2026, including interest relating to taxes that became due before that date.
However, interest that accrued before October 1 will remain governed by the rules applicable at the time, to the extent specifically provided under those regulations.
The new order replaces the 2017 notice on interest charged on unpaid taxes as well as other earlier notices covering the issue.
The ministry clarified that the new regulation does not alter the 10 per cent penalty for late payment provided under Section 65 of the Nigeria Tax Administration Act.
It added that tax authorities retain the power under Section 66 of the Act to waive penalties or interest where sufficient justification is provided.
The ministry urged taxpayers to file their returns and pay their taxes promptly, while those with outstanding liabilities were advised to settle them or engage the relevant tax authority.
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