Nigeria’s new regime for calculating interest on late tax payments takes effect today, October 1, 2026, introducing a market-linked approach that will determine how much taxpayers pay when they fail to settle their liabilities on time.
The Interest on Late Payment of Tax Order 2026, issued by the Federal Government in September, links interest on naira-denominated tax liabilities to prevailing monetary and fixed-income market rates. The measure applies to tax liabilities administered by federal, state and Federal Capital Territory tax authorities.
Under the new order, interest on unpaid naira tax liabilities is linked to the Central Bank of Nigeria’s Monetary Policy Rate plus one percentage point, subject to a floor based on the applicable 364-day Nigerian Treasury Bill rate.
The change replaces a more fixed approach to late-payment interest with a formula that can move as market conditions change. This means the financial cost of delaying tax payments can rise or fall alongside movements in key interest-rate benchmarks.
For businesses, the change makes the timing of tax payments more important. Companies with outstanding tax liabilities will need to account for the additional interest when assessing their cash flow, tax obligations and the cost of delaying settlement.
The new regime comes as Nigeria continues to implement wider changes to its tax system. The Federal Government has been moving toward a more unified framework for tax administration and enforcement, with the aim of improving compliance and strengthening revenue collection.
The market-linked formula also means businesses may face greater uncertainty over the eventual cost of outstanding tax liabilities. A rise in monetary or Treasury Bill rates could increase the interest payable on overdue taxes, while lower rates could reduce the cost.
Taxpayers with outstanding liabilities will therefore need to consider not only the principal amount owed but also the interest that can accumulate while the liability remains unpaid.
The new regime is now in force, making compliance and timely tax payment increasingly important for businesses seeking to manage financing costs and avoid additional liabilities.
