The Federal Government has introduced a market-linked interest regime for unpaid taxes, warning that delayed payments create revenue shortfalls that may force the government to borrow at a cost ultimately borne by the public.
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The new framework, which takes effect on October 1, 2026, provides that interest on naira-denominated tax debts will be charged at the prevailing Central Bank of Nigeria Monetary Policy Rate plus one percentage point.
The applicable rate will, however, not fall below the yield on 364-day Treasury Bills, which the government said reflects its borrowing cost when taxes are not paid as and when due.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, introduced the framework through the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026.
The Order was issued pursuant to Section 65 of the Nigeria Tax Administration Act, 2025, and will apply uniformly to tax obligations administered by the Nigeria Revenue Service, state internal revenue services and the Federal Capital Territory tax authority.
Explaining the rationale behind the framework, Oyedele said tax revenues belong to the public and that delayed payments could compel the government to borrow to meet its obligations.
“Tax that is due belongs to the public. When it is paid late, the 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.”
Under the previous framework, the additional margin above the MPR was five percentage points. The new Order reduces that margin to one percentage point for taxes payable in naira, subject to the Treasury Bills yield threshold.
For taxes payable in foreign currency, interest will be charged at the Secured Overnight Financing Rate, an international benchmark for United States dollar-denominated borrowing, plus six percentage points.
Where SOFR is discontinued, the Order provides that its officially recognised successor rate will apply.
A single interest rate will apply throughout each calendar month. The rate will be determined on the last business day of the preceding month and published by the Nigeria Revenue Service on its website no later than the third business day of every month.
Interest will be calculated daily on a simple-interest basis, beginning from the date the tax becomes due and continuing until the outstanding liability is fully paid.
The framework covers self-assessment obligations and other taxes administered by the NRS, state internal revenue services and the FCT tax authority.
Oyedele said the monthly publication of the applicable rates would give taxpayers certainty about the financial consequences of failing to pay their taxes when due.
“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.
“Clear rules make compliance easier and support a fair, predictable tax system.”
The new rates will apply to interest arising from October 1, including interest relating to taxes that became due before the commencement date. However, interest accrued before October 1 will continue to be governed by the rules applicable at the time it accrued.
The Order supersedes the 2017 notice on interest charged on unpaid taxes and all other earlier notices dealing with the subject.
It does not affect the statutory 10 per cent penalty imposed for late payment under Section 65 of the Nigeria Tax Administration Act.
Tax authorities will also retain their powers under Section 66 of the Act to waive penalties or interest where a taxpayer demonstrates good cause.
The Federal Government advised taxpayers to file their returns and pay their liabilities within the prescribed periods. Taxpayers with outstanding liabilities were urged to settle them promptly or engage the relevant tax authority
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