 |
| Photo Credit: Taiwo Oyesdele |
The Federal Government has introduced revised interest rates on late tax payments under the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026. The changes take effect on 1 October 2026 and apply across federal, state, and Federal Capital Territory tax authorities.
The order, issued by Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele pursuant to Section 65 of the Nigeria Tax Administration Act, 2025, links the cost of delayed payments more closely to prevailing market rates.
The goal is to discourage taxpayers from treating unpaid taxes as a low-cost source of finance while giving clearer, more predictable rules.
Key changes for naira-denominated taxes
Interest on unpaid taxes payable in naira will now be calculated as the Central Bank of Nigeria’s Monetary Policy Rate (MPR) plus 1 percentage point. This is a reduction from the previous 5-percentage-point margin above the benchmark.
A floor applies: the rate cannot fall below the yield on 364-day Treasury Bills. This floor reflects the government’s own cost of borrowing when tax revenue arrives late.
RELATED: → Currency Mismatch Threatens Airlines’ Survival, Says UNA Head
→ Suleiman Dikwa tells Nigeria to focus on productive investments
With the MPR recently reset at 23%, the illustrative rate would be 24%, subject to the Treasury-bill floor. The applicable rate is set monthly (based on the last business day of the preceding month) and must be published by the Nigeria Revenue Service on its website by the third business day of each month.
Rules for foreign-currency tax liabilities
For taxes payable in foreign currency, interest will be charged at the Secured Overnight Financing Rate (SOFR) plus 6 percentage points. If SOFR is discontinued, its officially recognised successor rate will apply.
Unchanged elements and calculation method
The existing 10% penalty for late payment under the Nigeria Tax Administration Act, 2025 remains in force. Interest is calculated on a simple-interest basis and accrues daily from the due date until payment.
Tax authorities retain the power under Section 66 of the Act to waive interest or penalties where good cause is shown.
Transition rules
Interest accruing from 1 October 2026 will use the new rates, including interest on liabilities that became due before that date. Interest that already accrued before 1 October 2026 continues under the rules that applied at the time.
Why the change was made
Oyedele explained the policy rationale clearly:
“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.”
By reducing the previous wider margin while still anchoring rates to market benchmarks and government funding costs, the framework aims to improve fairness and predictability for taxpayers while protecting public revenue.
Practical implications for taxpayers and businesses
• Monitor the published rates: Check the Nigeria Revenue Service website each month for the current applicable rate rather than assuming a fixed figure.
• Cash-flow planning: The lower margin (MPR + 1% versus the old +5%) reduces the interest burden compared with the prior regime, but the combination of interest plus the 10% penalty still makes deliberate delay costly.
• Foreign-currency obligations: Exporters, importers, or entities with foreign-currency tax liabilities face a SOFR-linked rate that can move with global dollar funding conditions.
• Outstanding liabilities: Review any pre-October arrears carefully. Pre-existing accrued interest stays under old rules; new interest from 1 October follows the revised formula.
• Compliance priority: Filing returns and paying on time remains the simplest way to avoid both the penalty and ongoing interest.
Taxpayers with questions about specific liabilities should contact the relevant tax authority (Nigeria Revenue Service or the applicable state/FCT internal revenue service) or seek professional advice. Official rates and the full order text should be treated as the authoritative sources.
This market-linked approach replaces earlier fixed-margin notices (including the 2017 notice) and is intended to create more consistent treatment nationwide.
Disclaimer: This article summarises publicly reported information about the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026 for general awareness. It is not tax, legal, or financial advice. Always verify current rates and rules with official sources and consult a qualified professional for your situation.
Post a Comment