FG Issues New Tax Order to Reduce Interest on Late Tax Payments

By Serah Achimugu
September 24, 2026

The Federal Government has introduced a new framework for determining interest payable on late tax payments, reducing the additional interest margin applicable to naira-denominated tax liabilities from five percentage points to one percentage point above the Central Bank of Nigeria’s Monetary Policy Rate (MPR).

The new regime is contained in the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, issued by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, pursuant to Section 65 of the Nigeria Tax Administration Act, 2025.

The Order takes effect from October 1, 2026, and applies uniformly to tax obligations administered by the Nigeria Revenue Service (NRS), State Internal Revenue Services and the Federal Capital Territory Internal Revenue Service.

New Interest Rate for Naira Tax Liabilities

Under the new framework, interest on tax liabilities payable in naira will be calculated at the CBN Monetary Policy Rate plus one percentage point.

However, the applicable rate will not fall below the yield on 364-day Nigerian Treasury Bills. According to the Federal Government, this floor reflects the cost of government borrowing where tax revenues are not received when due.

This represents a reduction in the additional margin from the previous five percentage points to one percentage point.

The government explained that the new approach is designed to link the financial cost of delaying tax payments more closely to prevailing market conditions.

According to Oyedele, taxes that are due belong to the public, and when payments are delayed, government may need to borrow to cover the resulting funding gap.

Foreign Currency Tax Liabilities

For tax liabilities payable in foreign currency, the applicable interest rate will be based on the Secured Overnight Financing Rate (SOFR) plus six percentage points.

Where SOFR is discontinued, the officially designated successor rate will apply.

Monthly Publication of Applicable Rates

The new Order introduces a monthly mechanism for determining and communicating the applicable interest rate.

Only one interest rate will apply for each calendar month, while the NRS is required to publish the applicable rate on its website by the third business day of every month.

Interest will be calculated on a daily basis using simple interest, starting from the date the tax becomes due until the outstanding liability is fully paid.

This monthly publication is intended to give taxpayers greater certainty when determining the financial implications of outstanding tax liabilities.

What Happens to Existing Tax Liabilities?

The new rates will apply to interest arising from October 1, 2026, including interest relating to tax liabilities that became due before the effective date.

However, interest that had already accrued before October 1 will remain subject to the rules applicable at the time, where those rules specifically govern the accrued interest.

The 2026 Order also supersedes the 2017 notice on interest on unpaid taxes and other earlier notices dealing with the subject.

10% Late-Payment Penalty Remains

Importantly, the reduction in the applicable interest rate does not remove the statutory 10% penalty for late payment under Section 65 of the Nigeria Tax Administration Act, 2025.

Therefore, taxpayers who fail to settle their tax liabilities when due may still be exposed to both the applicable late-payment interest and the statutory penalty.

Tax authorities also retain the power under Section 66 of the Act to waive applicable penalties or interest where a taxpayer is able to establish good cause.

What This Means for Taxpayers

The new framework changes the way the financial cost of late tax payments is determined. Rather than applying the previous five-percentage-point spread, the interest applicable to naira-denominated liabilities will now be linked to the prevailing MPR, subject to the Treasury Bill floor.

For businesses and individuals with outstanding tax liabilities, the change makes it important to monitor the monthly interest rate published by the NRS when calculating the cost of unpaid taxes.

Taxpayers with outstanding liabilities are also encouraged to settle their obligations promptly or engage the relevant tax authority where they require clarification or resolution of an outstanding assessment.

The Federal Government said the new framework is intended to provide greater certainty, transparency and predictability in tax administration while ensuring that the cost associated with delayed tax payments reflects prevailing funding conditions.

Key Takeaways

Effective date: October 1, 2026
Naira tax liabilities: MPR + 1 percentage point
Minimum rate: 364-day Treasury Bill yield
Foreign currency liabilities: SOFR + 6 percentage points
Rate publication: By the third business day of each month
Interest calculation: Daily, on a simple-interest basis
Late-payment penalty: 10% remains applicable
Coverage: NRS, State Internal Revenue Services and FCT Internal Revenue Service
Previous regime: 2017 notice and other earlier notices superseded