FG slashes interest on late tax payments from October 1
Tax
Abdullateef Fowewe
The Federal Government has reduced the interest charged on late tax payments, linking the rates more closely to market conditions in a bid to improve fairness and predictability for taxpayers.
In a statement released on Thursday, the Federal Ministry of Finance announced the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026.
The new framework takes effect on 1 October 2026 and applies uniformly across federal, state and Federal Capital Territory tax authorities.
Under the order, interest on tax payable in naira will now be charged at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point.
This represents a cut from the previous spread of five percentage points.
The rate will not fall below the yield on 364-day Treasury Bills, which reflects the government’s cost of borrowing when taxes are paid late.
For tax liabilities in foreign currency, interest will be calculated at the Secured Overnight Financing Rate (SOFR) plus six percentage points.
Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele 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.”
He added that the change also delivers greater 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.”
The Nigeria Revenue Service has been directed to publish the applicable rates on its website by the third business day of every month.
Interest will be calculated on a simple-interest basis and accrue daily from the due date until payment.
The order does not affect the existing 10 per cent penalty for late payment under Section 65 of the Nigeria Tax Administration Act, 2025.
Tax authorities retain the power to waive penalties or interest where good cause is shown.
Officials encouraged taxpayers to file returns and settle liabilities on time, noting that the new rates will apply to interest arising from 1 October 2026, including on some taxes that became due earlier.
