Tax defaulters to pay market-linked interest rates under new FG order

Taxpayers who fail to meet their payment deadlines will pay interest linked to prevailing market rates from October 1, 2026, under a new order issued by the Federal Government.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, issued the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, according to a statement by the Federal Ministry of Finance on Thursday.

The order, issued pursuant to Section 65 of the Nigeria Tax Administration Act, 2025, introduces a market-linked framework for calculating interest on unpaid taxes across federal, state and Federal Capital Territory tax authorities.

What the statement says

For taxes payable in naira, the interest rate will be the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point, subject to a floor equivalent to the yield on 364-day Treasury Bills.

The ministry said the new margin represented a reduction from the five percentage points previously applicable.

For foreign currency tax liabilities, taxpayers will pay interest at the Secured Overnight Financing Rate, an international benchmark for US dollar interest rates, plus six percentage points. An official successor rate will apply if SOFR is discontinued.

• Explaining the rationale for the order, Oyedele said, “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.”

Rates to change monthly

Under the new framework, one interest rate will apply for each calendar month, based on the applicable benchmark on the last business day of the preceding month.

• The Nigeria Revenue Service (NRS) has been directed to publish the applicable rates on its website by the third business day of each month.
• Interest will be calculated on a simple interest basis daily, beginning from the date the tax becomes due until payment is made.
• The rates will apply to self-assessment as well as assessments administered by the Nigeria Revenue Service and state and FCT internal revenue services.

Oyedele said the uniform framework would provide greater certainty for taxpayers regardless of the tax authority handling their liabilities.

• “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.”

10% penalty remains

The ministry clarified that the order does not remove the existing 10% penalty for late payment under Section 65 of the Nigeria Tax Administration Act.

• Consequently, defaulting taxpayers may incur both the 10% penalty and the applicable market-linked interest.
• However, relevant tax authorities retain their powers under Section 66 of the Act to waive penalties or interest where taxpayers demonstrate good cause.
• The new rates will apply to interest arising from October 1, including on taxes that became due before that date. Interest accrued before October 1 will remain subject to the rules applicable at the time.

The order supersedes the 2017 notice on interest on unpaid taxes and other previous notices on the subject.

The ministry advised taxpayers with outstanding liabilities to settle them promptly or engage the relevant tax authority, while taxpayers generally were encouraged to check the monthly published rates and meet their filing and payment obligations on time.

What you should know

In June 2025, President Bola Tinubu signed into law four landmark tax reform bills designed to modernise Nigeria’s fiscal and revenue administration framework. The legislation comprises the Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill.

• The new tax laws subsequently came into effect in January 2026, ushering in a new era of tax administration and revenue collection in the country.
• In March, the federal government rolled out new presumptive tax rules for Micro, Small, and Medium Enterprises (MSMEs) across Nigeria, aiming to simplify compliance and provide a clearer pathway into the formal economy.
• By June, the Federal Government also issued implementation guidelines for the transition from the repealed tax laws to the new Tax Acts 2025.

The guidelines provide direction for taxpayers, tax practitioners, revenue authorities and other stakeholders on how to manage issues arising from the shift from the previous tax regime to the new framework.