FG introduces market-linked interest on late tax payments from October 1

The Federal Government has introduced market-linked interest on late tax payments, with the new framework taking effect from October 1, 2026.

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, pursuant to Section 65 of the Nigeria Tax Administration Act, 2025.

Under the new framework, interest on naira-denominated taxes will be calculated at 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 of Finance said the new rate represents a reduction from the five percentage points previously applicable.

For tax liabilities denominated in foreign currencies, taxpayers will pay interest at the Secured Overnight Financing Rate plus six percentage points.

Explaining the policy, Oyedele said taxes due to government belong to the public and that delayed payments could force the government to borrow to cover funding gaps.

“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,” he said.

He added that linking the cost of late payment to prevailing market rates would prevent taxpayers from benefiting from cheaper financing by delaying their tax obligations.

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 will publish the applicable rates by the third business day of each month, while interest will be calculated daily on a simple-interest basis.

The ministry also clarified that the existing 10 per cent late-payment penalty remains in force, meaning taxpayers who default may be liable for both the penalty and the market-linked interest.

Oyedele said the new framework would provide certainty for taxpayers by ensuring that the applicable rates are published monthly and applied uniformly.

The new rates will apply to interest arising from October 1, including taxes that became due before that date, while interest accrued before October 1 will continue to be governed by the previous rules.