Nigeria's federal government will link the interest charged on overdue naira tax payments to the Central Bank of Nigeria's (CBN) Monetary Policy Rate (MPR) from October 1, 2026, replacing the previous fixed interest formula.

Under a new order signed by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, interest on overdue naira taxes will be calculated at MPR plus one percentage point. The measure, issued under Section 65 of the Nigeria Tax Administration Act, 2025, is formally known as the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026.

The new formula replaces the previous five-percentage-point margin added to the benchmark rate. The applicable interest rate cannot, however, fall below the yield on 364-day Treasury bills, meaning late-tax interest will remain above a minimum threshold tied to government borrowing costs.

That flooring rule matters more than it might appear. The CBN currently lists the MPR at 26.5%, while the 91-day Treasury bill rate sits at 16.3%. On today's figures, MPR plus one point comes to 27.5%. But because the CBN's rate moves with monetary policy, and Treasury bill yields shift at every auction, the figure is not fixed. It will be recalculated every month and published by the Nigeria Revenue Service (NRS), meaning taxpayers will need to check the current rate rather than assume last month's still applies. For taxpayers, the figures to watch going forward are the CBN's monetary policy decisions and the outcome of each Treasury bill auction, since those determine the numbers behind the calculation.

For businesses and individuals who fall behind on their taxes, the change ties the cost of delay directly to the price of money in the wider economy — a small technical shift in the tax rulebook, but one that will show up in every late-payment bill from October onward. In short, the government is moving from a fixed spread to a rate that moves with the market.

Interest starts running from the day the payment was due and keeps building until the taxpayer settles. It is calculated daily on a simple interest basis, with the NRS publishing the applicable monthly rate by the third business day of each month.

Here is what that looks like in practice. If the applicable annual rate is 27.5% and a taxpayer owes ₦1 million for 30 days, the interest alone would come to roughly ₦22,603 — before any penalty. That last word matters. The new order does not waive the 10% late-payment penalty under Section 65 of the Nigeria Tax Administration Act, so paying late can still mean facing the penalty on top of the interest.

Government officials frame the change as a matter of fairness. "If tax is due and paid late, government may have to borrow to fill the gap, and the cost falls on everyone," Oyedele said.

The system will apply across the Nigeria Revenue Service, the State Internal Revenue Services and the FCT tax authority. It also reaches backwards in one respect: it covers interest arising from October 1, including interest on some liabilities that fell due earlier. Interest that had already accrued before October 1, however, stays under the old rules.

For taxes payable in foreign currency, the rate becomes the Secured Overnight Financing Rate (SOFR) plus six percentage points. SOFR is benchmark that reflects the cost of borrowing US dollars in global markets, meaning foreign-currency interest will follow dollar money-market conditions rather than Nigerian monetary policy.

The change is not an invitation to pay late. The penalty stands, and interest piles up until the bill is cleared. What changes for businesses and individuals is predictability: one published rate for each calendar month makes the cost of delay far easier to work out in advance.