Nigerian banks raise lending rates in eight sectors despite CBN's 450bp cut

Nigerian businesses looking for cheaper loans are still facing higher borrowing costs. Average prime lending rates rose in eight of 11 key sectors even after the Central Bank of Nigeria cut its benchmark Monetary Policy Rate by a cumulative 450 basis points over 13 months.

An analysis by Financial Vanguard of CBN interest rate schedules for August 2025 and October 2026 showed that agriculture, manufacturing, construction and other productive sectors recorded increases. The development raises questions about how quickly CBN monetary easing is reaching borrowers.

Rate cuts, then higher loan costs

The CBN began easing in September 2025, cutting the MPR from 27.5% to 27%. A 50-basis-point reduction followed in February 2026, taking the rate to 26.5%. A larger 350-basis-point cut then lowered the MPR to 23% in September.

The cuts came as headline inflation eased from 15.93% in May 2026 to 15.39% in August and 14.63% in September. That had raised hopes that commercial banks would pass on lower rates to businesses and households. The latest banking data showed a mixed picture.

Agriculture, construction lead increases

Agriculture, forestry and fishing recorded the largest increase in average prime lending rates, from 23.44% to 24.77%. Construction rose from 25.25% to 26.40%. Government borrowing rates increased from 25.52% to 26.49%.

Manufacturing rates moved from 23.79% to 24.36%. Education rose from 26.33% to 26.85%. Healthcare, real estate, finance and insurance were also among the sectors that recorded higher rates. Arts and entertainment, oil and gas, and information and communication posted marginal reductions.

Average maximum lending rates across 10 sectors declined from 33.78% to 32.58%, showing that borrowing costs are moving unevenly across the banking system.

Why the cuts are not flowing through

Tunde Abioye, Head of Equity Research at Quest Merchant Bank, linked the divergence to banks' funding costs, liquidity conditions and credit risks. He said lower benchmark rates do not automatically mean cheaper loans, especially when lenders are worried about borrowers' ability to repay.

Nnamdi Nwizu, Co-Founder of Comercio Partners, said the increases were not widespread across banks. An analysis of 174 comparable bank-sector observations showed that 65 lending rates declined, 79 remained unchanged and only 30 increased. He said substantial adjustments by a relatively small number of banks influenced the overall averages.

Higher borrowing costs could prolong pressure on businesses seeking loans for expansion, equipment purchases and working capital. They may also discourage investment and raise operating expenses, with possible effects on consumer prices. Banks have also reduced some deposit rates, meaning savers may earn lower returns even as some borrowers pay more for credit.

CBN lending rate data for September showed banks charging borrowers from single digits to as high as 60%, depending on perceived credit risk. The figures cover prime lending rates for lower-risk customers and maximum lending rates for higher-risk borrowers.