Tax defaulters to pay market-linked interest rates under new FG order

Under a new order issued by the Federal Government, taxpayers who fail to meet their payment deadlines will pay interest rates tied to current market conditions starting October 1, 2026. The Ministry of Finance announced the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, which applies to federal, state, and Federal Capital Territory tax authorities.

For naira-denominated taxes, the interest rate will be the Central Bank of Nigeria's Monetary Policy Rate plus one percentage point, with a minimum yield equivalent to the return on 364-day Treasury Bills. This represents a reduction from the previous five percentage point margin. Foreign currency tax liabilities will incur interest at the Secured Overnight Financing Rate, an international benchmark for US dollar interest rates, plus an additional six percentage points.

If SOFR is discontinued, a follow-up rate will take its place. The uniform interest rate will be applied each month, based on the benchmark rate from the last business day of the previous month. While the new framework eliminates the existing 10% late payment penalty, taxpayers are still encouraged to settle outstanding obligations promptly or consult the appropriate tax authority.

The order supersedes earlier notices on the subject and provides greater certainty for taxpayers across all tax authorities. The new tax reform legislation, signed into law by President Bola Tinubu in June 2025, aims to modernize Nigeria's fiscal and revenue administration framework.