New rules peg naira-denominated tax interest to CBN policy rate, while dollar liabilities will be tied to SOFR…..
The Federal Government has introduced a new framework for calculating interest on overdue taxes, reducing the additional charge imposed on taxpayers who fail to settle their liabilities on time.
The Nigeria Tax Administration Order 2026, signed by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, will take effect from October 1, 2026.
The Federal Ministry of Finance said the order was issued under Section 65 of the Nigeria Tax Administration Act, 2025, and is designed to bring the cost of delayed tax payments closer to prevailing market conditions.
Under the new arrangement, interest on unpaid taxes denominated in naira will be calculated using the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point.
The ministry said the new spread represents a reduction from the five-percentage-point margin previously applicable.
However, the interest rate cannot fall below the yield on 364-day Nigerian Treasury Bills, ensuring that the cost of delaying tax payments continues to reflect the government’s own borrowing cost.
For tax obligations denominated in foreign currencies, the applicable interest will be based on the Secured Overnight Financing Rate, or SOFR, plus six percentage points.
SOFR is a widely used benchmark for US dollar-denominated borrowing. Should the benchmark be discontinued, the officially recognised successor rate will be used.
The new system will also introduce a monthly publication mechanism designed to give taxpayers greater certainty over their obligations.
The Nigeria Revenue Service has been directed to publish the applicable rates on its website by the third business day of every month, with the rate for each calendar month applying to relevant outstanding tax liabilities.
Explaining the rationale behind the reform, Oyedele said delayed tax payments effectively leave the government to find alternative funding for revenue that should already have been received.
“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,” the minister said.
He said the new framework would ensure that delaying tax payments does not become a cheaper source of financing than borrowing at prevailing market rates.
Oyedele also highlighted the importance of predictability, saying taxpayers should be able to determine in advance how much interest could accrue on an outstanding liability.
“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,” he said.
New rates to apply from October
The ministry clarified that the new rates will apply to interest accruing from October 1, 2026, including interest relating to taxes that became due before the commencement date.
However, interest that accrued before October 1 will remain governed by the rules applicable at the time, where those provisions specifically apply.
The 2026 Order also replaces the 2017 notice on interest charged on unpaid taxes, as well as other earlier notices covering the same subject.
Despite the change in the interest calculation, the existing 10 per cent penalty for late payment under Section 65 of the Nigeria Tax Administration Act remains unchanged.
Tax authorities will also continue to have the power to waive interest or penalties under Section 66 where a taxpayer can establish sufficient grounds for such relief.
The Finance Ministry urged taxpayers to ensure that their tax returns are filed and liabilities settled within the required deadlines to avoid additional costs.
Oyedele also advised taxpayers with existing outstanding obligations to either settle their liabilities promptly or contact the appropriate tax authority to discuss their position.
Taxpayers are expected to monitor the Nigeria Revenue Service website for the monthly rates applicable under the new framework.
