The Federal Government has changed the way interest on overdue tax payments will be calculated, introducing a market-linked system that takes effect from October 1, 2026.
The new rule is contained in the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, signed by Finance Minister Taiwo Oyedele.
It was issued under Section 65 of the Nigeria Tax Administration Act, 2025.
How the new system works
For taxes payable in naira, the applicable interest will be the CBN Monetary Policy Rate plus one percentage point.
Previously, the applicable spread was five percentage points.
The government has also introduced a floor. The interest rate cannot fall below the yield on 364-day Treasury Bills.
The NRS will publish the applicable monthly rate on its website by the third business day of every month.
This means taxpayers will be able to determine the interest rate applicable to late payments for each month.
Foreign currency liabilities
A separate formula applies to taxes payable in foreign currency.
Such liabilities will attract interest at SOFR plus six percentage points.
SOFR is a widely used benchmark for US-dollar interest rates.
Where SOFR is discontinued, its officially designated successor rate will be used.
Penalty has not been removed
Although the government has reduced the interest spread, the 10 percent penalty for late tax payment remains in force.
The Nigeria Tax Administration Act provides for the penalty separately from the interest charge.
The law also allows relevant tax authorities to waive interest or penalties where good cause is demonstrated.
What happens to existing tax debts?
The new rates will apply to interest arising from October 1, 2026.
This includes interest on tax liabilities that became due before the effective date, although interest that arose before October 1 will remain subject to the rules that applied when it arose.
The new Order replaces the 2017 notice and other previous notices covering interest on unpaid taxes.
Government urges taxpayers to comply
Oyedele said the revised framework is intended to make the cost of delayed tax payments more closely reflect market conditions.
He also emphasized the importance of certainty, saying taxpayers should know the applicable rate and how it will be calculated.
The minister urged individuals and businesses to file their tax returns and make payments when due.
Taxpayers with outstanding liabilities were also advised to contact the appropriate revenue authority to resolve their obligations.
The new framework forms part of Nigeria’s broader implementation of the Tax Acts 2025, which came into effect in 2026.
