Alliance Professional Services | Tax Update
The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr Taiwo Oyedele, has issued the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, fixing the interest rate chargeable on unpaid taxes under Section 65 of the Nigeria Tax Administration Act, 2025. The Order takes effect on 1 October 2026 and applies uniformly across Federal, State, and FCT tax authorities.
What the Order Provides
| Item | Detail |
| Tax paid in Naira | Central Bank of Nigeria’s Monetary Policy Rate (MPR) + 1 percentage point, but not less than the 364-day Treasury Bill yield |
| Tax paid in foreign currency | Secured Overnight Financing Rate (SOFR) + 6 percentage points (a defined successor rate applies if SOFR is discontinued) |
| How often the rate changes | Monthly, set on the last business day of the previous month |
| How interest is calculated | Simple interest, calculated daily, from the due date until payment |
| Where to find the rate | Nigeria Revenue Service (NRS) website, published by the 3rd business day of each month |
| Late-payment penalty | Unchanged — 10% under Section 65 of the Act |
| Waiver power | Relevant tax authorities retain power under Section 66 to waive penalty or interest where good cause is shown |
| Effective date | 1 October 2026 |
Why It Matters
Previously, interest on Naira-denominated tax liabilities was charged at MPR plus a 5 percentage point spread. The new Order narrows this to MPR plus 1 percentage point, a meaningful reduction in the cost of tax delinquency — though the rate is now floored at the 364-day Treasury Bill yield to prevent it from falling below the government’s own cost of borrowing.
As the Minister explained, the policy intent is to ensure that holding on to tax that is due is never cheaper than borrowing from the market, while giving taxpayers month-to-month certainty on exactly what late payment will cost them.
Transition Rules
- The new rates apply to interest arising from 1 October 2026, including on tax that was already overdue before that date.
- Interest that accrued before 1 October 2026 remains governed by the rules in force at the time it arose.
- The Order supersedes the 2017 notice on interest on unpaid taxes and any other earlier notices on the subject.
What This Means for Taxpayers
- Track the rate monthly. Because the applicable rate resets every month and is only published a few days into that month, taxpayers with ongoing liabilities should check the NRS website regularly rather than assuming a fixed annual rate.
- The 10% penalty still applies on top of interest. A reduced interest rate does not remove exposure to the statutory late-payment penalty.
- Interest keeps accruing during disputes and reviews. For taxpayers currently engaging with tax authorities on audits, reconciliations, or compliance reviews, outstanding liabilities continue to attract daily interest — settling promptly, or formally engaging the relevant authority, remains the most effective way to limit exposure.
- Foreign currency taxpayers face a materially higher rate (SOFR + 6%) than Naira taxpayers, reflecting currency risk — this is a relevant planning point for companies with USD-denominated tax obligations.
Key Takeaway
Taxpayers are encouraged to file returns and settle liabilities on time. Where liabilities are already outstanding, we recommend engaging early with the relevant tax authority — either to arrange settlement or to explore the Section 66 waiver provision where good cause exists.
Alliance Professional Services will continue to monitor developments on this Order and other tax administration updates. For guidance on how this affects your specific tax position, please reach out to our team.
Oluwatoyin Matthew Ishola Eniola
Senior Manager, Audit & Tax Resident Partner
CLICK HERE to download FG Reduces Interest Rate for Late Tax Payment – 2026
