The Federal Government, through the Nigeria Tax Administration Order 2026, has reduced the interest rate for late tax payments, effective 1 October 2026, to align with market rates. Minister of Finance and Coordinating Minister of the Economy Taiwo Oyedele, who signed the order, stated it ensures that delaying tax does not become a cheaper form of credit than market borrowing. The policy, issued under section 65 of the Nigeria Tax Administration Act, 2025, links late payment costs to the Central Bank of Nigeria’s (CBN) Monetary Policy Rate (MPR) plus one percentage point for Naira taxes and the Secured Overnight Financing Rate (SOFR) plus six percentage points for foreign currency taxes. This replaces the previous 5-percentage-point spread, with rates not falling below the yield on 364-day Treasury Bills, reflecting government borrowing costs when taxes are delayed.
Oyedele emphasized that the reform provides clarity for taxpayers, as the Nigeria Revenue Service (NRS) will publish monthly rates by the third business day of each month. He highlighted that the measure prevents public funds from being unduly burdened by late payments, stating, “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.” The order also maintains the 10% late payment penalty under section 65 of the Act and retains authorities’ power to waive penalties or interest if justified. Oyedele urged taxpayers to file returns promptly and consult the NRS website for updated rates, noting that the policy applies to interest arising from 1 October 2026, including pre-existing liabilities.
The reform aims to create a fairer tax system by tying late payment costs to real market conditions, reducing incentives for delayed payments. For Naira taxes, the new rate of MPR +1% is a significant reduction from the previous 5% spread, while foreign currency rates now use SOFR +6%, a shift from earlier frameworks. The policy supersedes the 2017 notice on unpaid taxes and ensures uniformity across federal and state tax authorities. Oyedele added that clear rules simplify compliance, stating, “Clear rules make compliance easier and support a fair, predictable tax system.” The changes also align with broader fiscal reforms, including the removal of petrol subsidies, which saved Nigeria ₦15.8 trillion over 30 months, as reported by the minister.
The Nigeria Revenue Service has been directed to implement the new rates, with taxpayers advised to monitor monthly updates on its website. The order does not alter the 10% penalty for late payments but allows for waivers under section 66 of the Act. Oyedele reiterated the importance of timely tax compliance, noting that the policy balances fiscal responsibility with taxpayer transparency. The move follows calls from the Nigeria Economic and Corporate Affairs (NECA) for states and local governments to account for ₦10.4 trillion in petrol subsidy funds, underscoring broader efforts to enhance public financial accountability.