ABUJA: Nigerian banks have increased average prime lending rates across several key sectors despite successive interest rate cuts by the Central Bank of Nigeria (CBN), raising concerns about the cost of borrowing for businesses seeking funds for expansion and daily operations.
A report by Financial Vanguard, based on the CBN’s published interest rate schedules for August 2025 and October 2026, found that average prime lending rates rose in eight of 11 major economic sectors during the period.
Prime lending rates are preferential interest rates offered to creditworthy corporate borrowers. Their increase suggests that some businesses are yet to benefit fully from the monetary easing measures introduced by the CBN.
The development comes despite a cumulative 450-basis-point reduction in the Monetary Policy Rate (MPR) over 13 months to September 2026.
The CBN began reducing its benchmark interest rate in September 2025, lowering the MPR from 27.5 per cent to 27 per cent.
The rate was subsequently reduced by 50 basis points to 26.5 per cent in February 2026 before the Monetary Policy Committee approved a further 350-basis-point cut to 23 per cent in September 2026.
The September adjustment followed a moderation in inflation, which declined from 15.93 per cent in May 2026 to 15.39 per cent in August and further to 14.63 per cent in September.
The reductions had raised expectations that commercial banks would lower borrowing costs, providing relief to households and businesses.
However, the latest lending-rate figures indicate that the impact of monetary easing has been uneven.
According to the Financial Vanguard analysis, agriculture, forestry and fishing recorded the largest increase among the sectors highlighted, with the average prime lending rate rising to 24.77 per cent in October 2026 from 23.44 per cent in August 2025.
Construction lending rates increased to 26.40 per cent from 25.25 per cent, while government borrowing rates rose to 26.49 per cent from 25.52 per cent.
Other sectors also recorded increases.
In human health and social work, the average prime rate climbed to 26.96 per cent from 26.11 per cent.
Real estate lending rates rose to 26.57 per cent from 25.82 per cent, while manufacturing increased to 24.36 per cent from 23.79 per cent.
Education recorded an increase to 26.85 per cent from 26.33 per cent, while finance and insurance rose to 25.88 per cent from 25.55 per cent.
Conversely, prime lending rates declined in arts, entertainment and recreation, oil and gas, and information and communication, falling by 0.66, 0.24 and 0.08 percentage points, respectively.
The figures suggest that the movement in lending rates differs across sectors.
While prime lending rates increased in several sectors, average maximum lending rates moved in the opposite direction.
The report showed that average maximum lending rates across 10 sectors fell to 32.58 per cent in October 2026 from 33.78 per cent in August 2025, representing a decline of 1.20 percentage points.
The reduction indicates that some borrowers may be experiencing lower quoted lending rates, even as preferred corporate customers in important sectors continue to face relatively high borrowing costs.
The difference between prime and maximum lending rates highlights the varying credit conditions facing businesses depending on their risk profiles and banks’ pricing decisions.
Tunde Abioye, Head of Equity Research at Quest Merchant Bank, said the divergence between the CBN’s policy rate and sectoral prime lending rates does not necessarily mean monetary policy transmission has failed.
He explained that lending rates are influenced by several factors beyond the benchmark interest rate, including banks’ funding costs, liquidity conditions, borrower profiles and risk-adjusted pricing.
According to Abioye, the figures may reflect a delayed and uneven transmission of monetary easing across the economy.
Nnamdi Nwizu, Co-Founder of Lagos-based investment bank Comercio Partners, also attributed the trend to differences in how individual banks price credit.
Nwizu said the increase in average prime lending rates was not widespread across the banking system.
Citing his firm’s analysis, he disclosed that out of 174 comparable bank-sector prime lending rate observations across seven identified sectors, 65 recorded reductions, 79 remained unchanged and 30 increased.
He said the figures suggest that the rise in average prime rates was influenced by relatively large upward adjustments by a smaller number of banks rather than a general increase across the banking industry.
The lending-rate changes have occurred alongside reductions in the interest rates banks offer depositors.
The Financial Vanguard analysis showed that average savings deposit rates declined to 6.61 per cent in October 2026 from 7.81 per cent in August 2025.
Average time-deposit rates dropped by 2.24 percentage points to 12.28 per cent from 14.52 per cent, while average demand deposit rates edged down to 1.48 per cent from 1.59 per cent.
The benchmark savings rate offered across major commercial lenders also declined to 6.90 per cent from 8.25 per cent.
Nwizu noted that the reductions in deposit quotations and maximum lending rates indicate that some repricing has already occurred.
However, he cautioned against concluding that monetary easing had failed, noting that the CBN’s September 22, 2026, MPR adjustment came only 17 days before the October lending-rate observation.
He said it was still early to assess the full impact of the policy adjustment on borrowing costs.
Nwizu also referenced a June 2026 International Monetary Fund study highlighting asymmetric interest-rate transmission in Nigeria, where lending rates reportedly respond faster to monetary tightening than to easing.
Analysts have warned that persistently high lending rates could affect business investment, profitability and employment generation.
Abioye said elevated borrowing costs for prime customers could discourage new borrowing, particularly for discretionary expansion projects, capital expenditure and long-term investments.
The impact, he noted, would vary across sectors and borrowers.
Nwizu warned that expensive credit could constrain businesses that depend heavily on bank financing to expand operations and maintain working capital.
For manufacturers and agricultural businesses, higher interest expenses could increase the cost of financing raw materials, inventories and daily operations.
In real estate, elevated financing costs could affect project viability and delay new developments.
Businesses in education, information technology and financial services may also reconsider expansion plans and capital spending in response to expensive credit.
At the broader economic level, analysts said sustained high borrowing costs could weaken private investment, slow job creation and limit improvements in productive capacity.
They also warned that these supply-side pressures could complicate efforts to achieve sustainable disinflation.
Although the CBN has reduced its benchmark interest rate, the latest figures suggest that businesses may have to wait longer for the full benefits of monetary easing to reflect in their borrowing costs.
The pace of adjustment will depend partly on banks’ funding conditions, liquidity, credit risks and competitive pressures.
For businesses planning expansion or seeking working capital, the uneven movement in lending rates underscores the importance of comparing credit offers and assessing financing costs before taking new loans.
Source: Financial Vanguard analysis of CBN interest rate schedules, with comments from Quest Merchant Bank and Comercio Partners.
