FG links interest charges on unpaid taxes to borrowing costs

The Federal Government in Nigeria has established a new framework to tie interest charges on unpaid taxes to prevailing borrowing costs, effective October 1, 2026. The Minister of Finance, Taiwo Oyedele, announced this change via the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026. Under the new order, interest on naira-denominated tax debts will be calculated at the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point, with a minimum rate tied to the yield on 364-day Treasury Bills.

This link between unpaid taxes and government borrowing costs aims to prevent the government from borrowing to cover revenue shortfalls due to delayed tax payments. The order applies uniformly across federal, state, and Federal Capital Territory tax authorities, reducing the additional margin above the Monetary Policy Rate from five percentage points to one percentage point for naira-payable taxes.

For foreign currency taxes, interest is charged at the Secured Overnight Financing Rate, plus six percentage points. The Nigeria Revenue Service is required to publish the applicable rates on its website monthly. Oyedele emphasized the transparency and fairness of the new system, stating that taxpayers will have certainty about the financial consequences of late payments.

The order supersedes previous notices and retains the 10% penalty for late payment under Section 65 of the Nigeria Tax Administration Act, 2025. Taxpayers are encouraged to comply with tax obligations in a timely manner.