The Federal Government has reduced the interest charged on late tax payments, effective October 1, 2026. The new rate is the Central Bank of Nigeria's (CBN) Monetary Policy Rate (MPR) plus one percentage point, down from the previous MPR plus five percentage points. However, the rate cannot fall below the yield on 364-day Treasury Bills. The 10% penalty for late tax payment remains unchanged.
New Interest Rate Details and Scope
Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, signed the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026. The Federal Ministry of Finance announced the change on Thursday, September 24, 2026. The new rule applies to all interest that starts accumulating from October 1, 2026, even if the original tax became due before that date. Interest that had already built up before October 1 will continue under the old rules where applicable.
For taxes payable in naira, interest is charged at the CBN's MPR plus one percentage point. The ministry explained that this reduction from the five percentage point spread reflects the cost to the government when taxes are paid late. For taxes payable in foreign currencies, interest will be calculated using the Secured Overnight Financing Rate (SOFR) plus six percentage points. If SOFR is replaced in the future, its official successor benchmark will automatically apply.
Transparency and Calculation Methods
The Nigeria Revenue Service (NRS) has been directed to publish the applicable interest rate on its website every month, no later than the third business day. Interest will be calculated daily using simple interest, starting from the day the tax becomes due until it is fully paid. This change replaces the 2017 notice on interest for unpaid taxes and every earlier directive on the subject.
Oyedele explained that delayed tax payments create funding problems for the government. He said: "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. 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."
Penalties and Compliance Advice
The 10% penalty for late tax payment under Section 65 of the Nigeria Tax Administration Act, 2025, remains unchanged. Tax authorities still have the legal power to waive penalties or interest in cases where there is a genuine reason for the delay. Oyedele added: "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. Clear rules make compliance easier and support a fair, predictable tax system."
Businesses and individuals with unpaid tax liabilities are advised to settle them quickly or engage the relevant tax authority before additional charges continue to accumulate.
