Nigeria's federal government will begin applying market-linked interest rates to unpaid taxes from October 1, 2026, under a new order signed by Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele. The Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, was issued under Section 65 of the Nigeria Tax Administration Act, 2025.
Standardising Interest Calculation Across All Tiers of Government
The Federal Ministry of Finance announced the development in a statement on Thursday, describing the move as an effort to standardise how interest on overdue taxes is calculated across all tiers of government. The framework covers taxes administered by federal, state and FCT tax authorities, with rates published monthly by the Nigeria Revenue Service.
For tax liabilities denominated in naira, the applicable interest rate will be the Central Bank of Nigeria's Monetary Policy Rate plus one percentage point, with a floor based on the yield on 364-day Treasury Bills. The ministry noted this represents a reduction from the five percentage points previously in effect.
How the New Interest Rates Will Work
Foreign currency tax obligations will attract interest calculated at the Secured Overnight Financing Rate (SOFR) plus six percentage points. If SOFR is discontinued, an official successor benchmark will take its place. A single rate will apply for each calendar month, determined by the relevant benchmark on the last business day of the previous month.
The Nigeria Revenue Service will publish the applicable rates on its website by the third business day of each month. Interest will accrue daily on a simple-interest basis from the date the tax falls due until full payment is received. The framework applies to self-assessments and assessments managed by the Nigeria Revenue Service, state internal revenue services and the FCT revenue authority.
Minister's Justification for the New Order
Oyedele said the change was designed to prevent taxpayers from treating delayed payment as a cheap alternative to borrowing from the market. "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," he said. "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."
Taxpayers with outstanding liabilities could face both the existing 10% penalty and the new market-linked interest charges. The new order does not replace the existing 10% penalty for late payment under the Nigeria Tax Administration Act. Taxpayers who miss their deadlines may therefore face both the penalty and the market-linked interest simultaneously.
Waivers and Transitional Provisions
Tax authorities retain powers under Section 66 of the Act to waive penalties or interest where a taxpayer can demonstrate good cause. The new rates will apply to interest arising from October 1, including on taxes that became due before that date. Interest that accrued before October 1 will remain subject to the rules that were in place at the time.
The order replaces the 2017 notice on interest on unpaid taxes and all related previous notices. The ministry urged taxpayers with outstanding liabilities to settle them promptly or engage the relevant tax authority and advised all taxpayers to monitor the monthly rates the Nigeria Revenue Service will publish on its website.
Earlier, Legit.ng reported that concerns emerged among Nigerians living abroad following the introduction of Nigeria's new tax reforms ahead of their 2026 implementation. Some Nigerians in the diaspora, particularly those who regularly send money to relatives in Nigeria, feared that personal remittances and income earned abroad would automatically become subject to Nigerian tax. The concerns were amplified by social media posts and discussions about how the new tax laws would affect Nigerians living outside the country.
