The Federal Government will begin charging market-linked interest on late tax payments from October 1, 2026, under a new framework issued by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele.

The Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, issued pursuant to the Nigeria Tax Administration Act, 2025, provides a uniform method for determining interest on overdue tax liabilities handled by federal, state and Federal Capital Territory tax authorities.

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

The Federal Ministry of Finance said the new spread represents a reduction from the five-percentage-point margin previously applicable.

For tax obligations denominated in foreign currency, the applicable interest will be based on the Secured Overnight Financing Rate, or SOFR, plus six percentage points. A recognised successor benchmark will apply if SOFR is discontinued.

Explaining the new framework, Oyedele said the system was designed to ensure that taxpayers do not benefit financially from delaying their tax payments.

He said government could be forced to borrow when expected tax revenue is not received on time, creating additional financing costs for the public.

Under the new arrangement, the applicable interest rate will be determined monthly using the relevant benchmark on the last business day of the preceding month.

The Nigeria Revenue Service will publish the rate on its website by the third business day of each month.

Interest will accrue daily on a simple-interest basis, beginning from the date a tax liability becomes due and continuing until the outstanding amount is paid.

The framework will cover self-assessed taxes as well as liabilities arising from assessments administered by the Nigeria Revenue Service, state internal revenue services and the FCT Internal Revenue Service.

Oyedele said the uniform approach would give taxpayers greater certainty by ensuring that the applicable rates are publicly available and calculated using the same framework across tax authorities.

The ministry also clarified that the new order does not replace the existing 10 per cent penalty for late payment prescribed under Section 65 of the Nigeria Tax Administration Act.

Consequently, taxpayers who default may face both the 10 per cent penalty and the applicable market-linked interest.

However, the relevant tax authority may waive the penalty or interest under Section 66 where a taxpayer establishes sufficient grounds for the waiver.

The new rates will apply to interest accruing from October 1, including interest on taxes that became due before that date. Interest that accrued before October 1 will remain governed by the rules applicable at the time.

The order also replaces the 2017 notice and other previous notices governing interest on unpaid taxes.

The ministry advised taxpayers with outstanding liabilities to settle them promptly or engage the appropriate tax authority, while urging taxpayers generally to monitor the monthly interest rates and comply with their filing and payment obligations.

The new order forms part of the broader implementation of Nigeria’s 2025 tax reform framework, which came into effect from January 1, 2026. The Federal Ministry of Finance has issued transition guidelines to clarify how taxpayers and revenue authorities should move from the repealed tax laws to the new framework.