From 1 October 2026, Nigerian businesses that pay tax late will face an interest charge linked to current market rates.
For naira liabilities, the rate will be the CBN Monetary Policy Rate plus one percentage point, subject to a minimum based on the yield on the 364 day Treasury bill. With the MPR at 23%, the starting reference rate is 24%, unless the Treasury bill floor is higher.
Foreign currency liabilities will attract the Secured Overnight Financing Rate plus six percentage points. The Nigeria Revenue Service will publish the applicable rates by the third business day of each month. Interest will be calculated daily using simple interest, and the existing 10% late payment penalty remains.
The order takes effect on 1 October 2026 under section 65 of the Nigeria Tax Administration Act. The new framework is explained here.
Tax discipline should work in both directions
The government’s reasoning is understandable. If tax remains with a taxpayer after the due date, government may have to borrow to cover the shortfall. Delaying tax should not become a cheaper source of finance than normal borrowing.
However, the same principle raises another question. What happens when government holds money that belongs to a business?
The Nigeria Tax Administration Act provides that a general tax refund should be paid within 90 days after the relevant authority’s decision. A valid VAT refund should be made within 30 days, or the amount should be set off against another tax liability. The Act sets out the refund framework here.
If a validated ₦500 million refund is delayed, the company may need to borrow the same amount to fund payroll, inventory or suppliers. At current lending rates, that delay has a real cost.
If money has a time value when a taxpayer owes government, it also has a time value when government owes a taxpayer.
A balanced system should provide payment or automatic set off within the statutory period, with a clear remedy when a validated refund remains unpaid.
Companies must also clean up their own records
Some businesses still present different financial pictures to different audiences. One set of numbers may go to lenders or investors, while another is prepared for tax. Revenue may be understated, expenses overstated or VAT retained to support cash flow.
These practices may appear to reduce tax in the short term, but they can create a much larger problem later.
When a company approaches a bank, private equity investor or bond market, the funder may ask for audited accounts, tax returns, bank statements, VAT records, payroll information, customer contracts and revenue reconciliations.
If those records tell different stories, a tax issue becomes a credibility issue. A company cannot expect institutional investors to trust its forecast when its historical records cannot be reconciled.
Tax records affect access to capital
Due diligence looks backwards. An investor may review several years of audited accounts, tax filings, contracts and bank records.
Unresolved tax problems can reduce valuation, delay a transaction, lead to indemnities or require money to be held in escrow. In serious cases, an investor may withdraw completely.
A tax strategy that saves ₦100 million today could reduce a company’s value by billions tomorrow.
This is why a growing company needs one reliable financial truth. Differences between management accounts, audited statements and tax returns may be legitimate, but they must be documented and explainable.
Tax planning is different from tax evasion
Businesses are entitled to arrange their affairs efficiently. They can lawfully use deductions, capital allowances, incentives, tax credits, treaty provisions, group structures and suitable financing arrangements.
Deliberately hiding revenue, creating false expenses or collecting VAT without remitting it is different.
The objective of a responsible CFO should be to achieve the most efficient lawful tax position while protecting the company’s ability to raise capital and operate for the long term.
VAT should not become ordinary working capital
VAT is especially sensitive because the company often collects it on behalf of government. A business facing cash pressure may be tempted to use those receipts temporarily.
The danger is a cycle that becomes progressively more expensive:
Management may believe it has working capital when part of that balance is actually unpaid tax.
What CFOs should do now
- Establish one financial truth. Reconcile management accounts with audited statements, tax filings, bank receipts, VAT returns and customer records.
- Put tax into the cash forecast. The 13 week forecast should show what is due, when it is due, expected refunds and open disputes.
- Measure historical exposure. Quantify unpaid VAT, unresolved withholding tax, inconsistent returns and possible penalties before an investor or audit discovers them.
- Give the board a clear tax dashboard. It should show tax due, tax paid, arrears, refunds, audits, disputes and the largest exposures.
- Prepare early for capital raising. Clean up records before approaching a bank, investor or public market.
Government also has work to do
Lasting compliance requires confidence that the system works fairly. Refunds should be processed within statutory timelines. Valid credits should be recognized quickly. Assessments should be predictable, taxpayer accounts easy to reconcile and disputes resolved without excessive delay.
The new market linked formula gives businesses greater certainty about the cost of delay. That is useful progress. The next step is a tax relationship based on reciprocity.
Government should receive tax when it is due. Businesses should receive valid refunds when they are due. CFOs should treat tax as a matter of cash flow, governance, reputation and capital readiness.
The final question is not how much tax a company avoided. It is whether outsiders can trust the financial numbers the company produces.