The Federal Government has introduced a new tax administration order that reduces the interest margin applied when taxpayers fail to meet their payment deadlines.
The Nigeria Tax Administration Order 2026 will take effect on October 1, 2026, and establishes a new method for calculating interest on overdue taxes under Section 65 of the Nigeria Tax Administration Act, 2025.
Under the new arrangement, interest charged on unpaid taxes will be more closely linked to prevailing market rates, providing taxpayers with greater certainty over the financial consequences of delayed payments.
For taxes payable in Naira, the applicable interest rate will be the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point.
This represents a reduction from the previous margin of five percentage points. However, the applicable rate cannot fall below the yield on 364-day Treasury Bills, reflecting the government’s cost of borrowing when expected tax revenue is delayed.
For taxes denominated in foreign currency, the interest rate will be calculated using the Secured Overnight Financing Rate, commonly known as SOFR, plus six percentage points.
If SOFR is discontinued, the official benchmark introduced to replace it will be used for the calculation.
The Order also provides for the applicable rate to be determined for each calendar month.
The Nigeria Revenue Service has consequently been directed to publish the relevant rates on its website no later than the third business day of every month.
Explaining the reason for the change, Oyedele said the measure was designed to ensure that delaying tax payments does not become a less expensive alternative to borrowing money through conventional channels.
“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.”
The Minister also said the framework would provide a uniform and predictable system for taxpayers dealing with federal and state revenue authorities.
He added: “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. Clear rules make compliance easier and support a fair, predictable tax system.”
The revised rates will apply to interest arising from October 1, 2026, including interest connected to taxes that became due before the commencement date.
However, interest accumulated before October 1 will remain subject to the rules that applied at the time, where specifically provided for under the previous framework.
The new Order also replaces the 2017 notice governing interest on unpaid taxes, as well as other earlier notices covering the same subject.
Despite the adjustment to interest rates, the existing 10 percent penalty for late tax payments under Section 65 of the Act remains unchanged.
Relevant tax authorities will also retain the power provided under Section 66 of the Act to waive interest or penalties where a taxpayer can demonstrate good cause.
Oyedele advised individuals and businesses to file their tax returns and make payments within the required deadlines. He also urged taxpayers to check the rates published monthly by the Nigeria Revenue Service.
Taxpayers with outstanding liabilities were further encouraged to settle them promptly or approach the appropriate tax authority to address their obligations.