ABUJA — The Federal Government has issued a new executive tax order reducing the interest spread charged on late tax payments, replacing fixed markups with a dynamic, market-linked benchmark to ease compliance friction for corporate and individual taxpayers.
The directive, contained in the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, was officially signed on Thursday, September 24, 2026, by Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele. Issued under Section 65 of the Nigeria Tax Administration Act, 2025, the new regulation will take effect nationwide from October 1, 2026, applying uniformly across the Nigeria Revenue Service (NRS) as well as state and FCT internal revenue authorities.
Under the newly restructured framework, interest on overdue naira-denominated tax liabilities will now be calculated at the Central Bank of Nigeria’s (CBN) Monetary Policy Rate (MPR) plus one percentage point. The revised formula replaces the previous five-percentage-point spread above the MPR, significantly lowering the financial penalty margin for delayed tax settlements. However, the order stipulates a safeguard floor, ensuring that the applicable interest rate cannot drop below the prevailing yield on 364-day Treasury Bills.
For tax obligations payable in foreign currencies, interest will be pegged to the Secured Overnight Financing Rate (SOFR) plus six percentage points, with provisions to adopt an official successor benchmark should SOFR be phased out. The Nigeria Revenue Service is mandated to publish updated applicable rates on its public portal by the third business day of every calendar month, based on benchmark figures recorded on the final business day of the preceding month.
Explaining the rationale behind the policy shift, Oyedele stated that the measure is intended to ensure that withholding public revenue does not serve as a cheaper alternative to open-market commercial borrowing, while simultaneously preventing punitive financial strain on businesses navigating cash-flow constraints.
“Tax that is due belongs to the public,” Oyedele noted. “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.”
The Ministry of Finance clarified that while the interest markup has been scaled down, the statutory 10 percent penalty for late payment under Section 65 of the Act remains in effect, alongside discretionary powers granted to revenue authorities under Section 66 to waive penalties or interest where valid cause is demonstrated. The 2026 order officially supersedes the legacy 2017 late tax payment guidelines.
