- New Market-Linked Regime Applies Across Federal, State And FCT Tax Authorities, Says Oyedele
The Federal Government has moved to reduce the cost of late tax payments, with the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, approving a new interest regime that will take effect from October 1, 2026.
Under the new Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, interest on tax payable in naira will be tied to the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus one percentage point, representing a sharp reduction from the previous five-percentage-point spread.
The new regime, issued pursuant to Section 65 of the Nigeria Tax Administration Act, 2025, will apply uniformly to taxpayers dealing with the Nigeria Revenue Service, state tax authorities and the Federal Capital Territory Internal Revenue Service.
The Federal Ministry of Finance, in a statement issued in Abuja on Thursday, said the new framework was designed to make the cost of delaying tax payments more predictable while ensuring that taxpayers do not find it cheaper to withhold government revenue than to obtain credit from the market.
For naira-denominated tax liabilities, however, the applicable interest rate will not fall below the yield on 364-day Treasury Bills.
For tax liabilities payable in foreign currency, the rate will be based on the Secured Overnight Financing Rate (SOFR), the international benchmark for US dollar-denominated borrowing, plus six percentage points.
The Ministry said that where SOFR is discontinued, its officially recognised successor benchmark would be used.
Under the new system, the applicable rate will be determined once every calendar month, based on the last business day of the preceding month, and published by the Nigeria Revenue Service on its website by the third business day of the month.
Explaining the rationale behind the policy, Oyedele said government revenue delayed by taxpayers ultimately imposes a financing burden on the public.
“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,” the Minister said.
Oyedele added that the new framework would align the cost of late payment with prevailing market conditions.
“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.
The Minister also stressed that the reform was intended to remove uncertainty and promote consistency in tax administration across the country.
“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,” Oyedele said.
According to him, “Clear rules make compliance easier and support a fair, predictable tax system.”
The Ministry said interest would be calculated as simple interest on a daily basis, beginning from the date the tax became due until the date of payment.
The new rules will apply to self-assessment taxpayers, the Nigeria Revenue Service, state Internal Revenue Services and the FCT tax authority.
However, the government clarified that the new order does not scrap the existing 10 per cent penalty for late payment prescribed under Section 65 of the Nigeria Tax Administration Act.
Tax authorities will also retain their statutory power under Section 66 of the Act to waive interest or penalties where sufficient good cause is established.
The Ministry further clarified the transition arrangements, stating that the new rates would apply to interest arising from October 1, 2026, including interest relating to tax that became due before that date.
However, interest that accrued before October 1 would remain governed by the rules applicable at the time it arose.
The new Order consequently supersedes the 2017 notice on interest on unpaid taxes and other earlier notices dealing with the subject.
The Federal Government urged taxpayers with outstanding liabilities to settle them promptly or engage the relevant tax authority, while advising all taxpayers to file returns and pay their obligations within the prescribed deadlines.
The Ministry also directed taxpayers to monitor the Nigeria Revenue Service website for the applicable monthly interest rate.
The policy effectively replaces a fixed and wider interest spread with a market-linked mechanism, meaning the financial cost of delayed tax payments will now move more closely with prevailing monetary and government borrowing conditions.
