Taxpayers in Nigeria who delay their tax payments will face a new interest-rate regime from October 1, 2026, as the Federal Government moves to link the cost of unpaid taxes more closely to prevailing market rates. The new framework, issued under the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, replaces the previous system and is expected to give taxpayers a clearer idea of the financial cost of delaying their obligations.

Under the new arrangement, interest on naira-denominated tax liabilities will be calculated at the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus one percentage point, compared with the previous five-percentage-point margin. With the MPR currently at 23%, the applicable rate would initially be 24%, although the rate will be subject to a floor based on the yield of 364-day Treasury bills. The change is part of a broader effort to make tax administration more predictable and closely aligned with market conditions.

For foreign-currency tax liabilities, the interest will be tied to the Secured Overnight Financing Rate (SOFR) plus six percentage points. The applicable rate will be reviewed monthly, with the relevant rate determined on the last business day of the preceding month. The Nigeria Revenue Service is expected to publish each month’s rate by the third business day, while interest will be calculated as simple interest on a daily basis from the date the tax becomes due until payment is made.

Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele, said the framework is intended to prevent taxpayers from treating delayed tax payments as a cheaper alternative to borrowing money from the market. He also said the system would provide a uniform basis for taxpayers dealing with federal, state and Federal Capital Territory tax authorities. The government has maintained that clearer rules could make compliance more predictable for businesses and individuals.

Importantly, the new order does not remove the existing 10% penalty for late tax payment under Section 65 of the Nigeria Tax Administration Act, 2025. The ministry said the new interest regime will apply to interest arising from October 1, including interest on tax that became due before that date, while interest already accrued under the previous rules will remain governed by those rules. Taxpayers with outstanding liabilities have therefore been advised to settle them promptly or engage the relevant tax authority.

source: The cable