FG cuts interest on late tax payments
Federal Government Reduces Late Tax Payment Interest Rate
By Emma Ujah, Abuja Bureau Chief
ABUJA — Starting October 1, 2026, the Federal Government will implement a reduced interest rate for taxpayers who settle their tax liabilities late. This change will affect taxpayers under the jurisdiction of federal, state, and Federal Capital Territory tax authorities.
The new interest rate for tax liabilities paid in naira will be aligned with the Central Bank of Nigeria’s Monetary Policy Rate (MPR), augmented by one percentage point. This marks a significant decrease from the previous rate, which included a five-percentage-point spread above the MPR.
This adjustment is part of the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, a directive issued by Finance Minister and Coordinating Minister of the Economy, Mr. Taiwo Oyedele. The order is established under Section 65 of the Nigeria Tax Administration Act, 2025.
Oyedele emphasized that the new interest framework would be uniformly applied across all tax authorities, ensuring consistency for taxpayers. However, he noted that the naira interest rate will not fall below the yield on 364-day Treasury Bills, which reflects the Federal Government’s borrowing costs due to delayed tax payments.
For tax liabilities payable in foreign currencies, the interest rate will be calculated based on the Secured Overnight Financing Rate (SOFR) plus six percentage points. Should SOFR be discontinued, the successor rate designated by officials will be utilized.
In discussing the rationale behind the changes, Oyedele stated that the goal is to closely tie the cost of late payments to current market conditions, thereby providing enhanced clarity for taxpayers regarding their obligations. He underscored the importance of timely tax payments, noting that late payments may force the government to borrow, impacting public resources.
“This Order aligns the cost of late payment with real market rates, preventing tax delays from becoming a cheaper credit option,” he said.
The minister noted that the reform aims to foster fairness and improve predictability in tax administration.
He also stated, “Every taxpayer will know the applicable interest rate in advance, allowing for easier compliance and a more equitable tax system.”
Under the new system, only one interest rate will be applicable each calendar month. The Nigeria Revenue Service (NRS) is required to publish the current interest rate on its website by the third business day of every month.
These revised rates will apply to interest accruing from October 1, 2026, including interest on liabilities that became due before that date. However, interest accrued prior to October 1 will still be governed by the existing regulations.
This order also replaces the 2017 notice regarding interest on unpaid taxes and previous announcements on the matter. Importantly, it does not affect the 10-percent penalty for late payments established under Section 65 of the Nigeria Tax Administration Act. Tax authorities retain the discretion to waive penalties or interest if a taxpayer demonstrates valid reasons for their delay.
The government is urging taxpayers to file their tax returns and make payments promptly, advising those with outstanding liabilities to address them directly with the relevant tax authorities. Taxpayers are also encouraged to regularly consult the NRS website for updates on the monthly interest rates.
These changes are part of ongoing reforms in tax administration aimed at enhancing rule clarity and ensuring compliance while bolstering public revenue collection.
