Nigerian banks have raised average prime lending rates across eight major sectors of the economy despite successive interest rate cuts by the Central Bank of Nigeria (CBN), raising concerns that businesses may continue to struggle with expensive credit even as monetary policy shifts towards easing.
The development presents a challenge for companies seeking affordable financing to expand operations, purchase equipment, fund inventories and increase production, particularly in agriculture, construction, manufacturing and real estate.
According to a report by Vanguard published on November 2, 2026, an analysis of CBN interest rate schedules for August 2025 and October 2026 showed that average prime lending rates increased in eight of 11 economic sectors examined.
Prime lending rates are preferential interest rates offered to creditworthy borrowers, particularly established businesses considered less risky by banks.
The findings contrast with the CBN’s reductions in its Monetary Policy Rate (MPR), which fell from 27.5 per cent to 27 per cent in September 2025, declined further to 26.5 per cent in February 2026 and dropped significantly to 23 per cent in September 2026.
The cumulative 450-basis-point reduction over the period had raised expectations that commercial banks would begin offering cheaper loans to businesses and other borrowers. However, the latest figures indicate that the benefits of monetary easing have not been evenly reflected in the lending rates available to preferred corporate customers.
Among the sectors recording increases, agriculture, forestry and fishing experienced one of the sharpest movements, with the average prime lending rate rising to 24.77 per cent from 23.44 per cent.
Construction recorded an increase from 25.25 per cent to 26.40 per cent, while government-related borrowing rose from 25.52 per cent to 26.49 per cent.
The average prime lending rate for human health and social work increased to 26.96 per cent from 26.11 per cent. Real estate rose to 26.57 per cent from 25.82 per cent, while manufacturing climbed to 24.36 per cent from 23.79 per cent.
Education also recorded an increase, with the average rate rising to 26.85 per cent from 26.33 per cent. Finance and insurance experienced a smaller increase, moving from 25.55 per cent to 25.88 per cent.
By contrast, average prime lending rates declined in arts, entertainment and recreation, oil and gas, and information and communication, suggesting that the effect of monetary policy changes varies across industries.
The picture was somewhat different for maximum lending rates. Across 10 sectors examined, average maximum lending rates fell from 33.78 per cent to 32.58 per cent, representing a reduction of 1.20 percentage points.
The divergence suggests that some borrowers may be seeing lower quoted rates even as preferred corporate customers in several key sectors continue to face higher financing costs.
Tunde Abioye, Head of Equity Research at Quest Merchant Bank, said the difference between the CBN’s benchmark rate and commercial banks’ prime lending rates did not necessarily mean that monetary policy transmission had broken down.
He explained that lending rates are influenced by several factors beyond the benchmark rate, including banks’ funding costs, liquidity conditions, borrower profiles and the risks associated with individual loans.
According to Abioye, the figures may reflect a delayed and uneven transmission of monetary easing rather than a complete failure of the rate reductions to lower borrowing costs.
Nnamdi Nwizu, Co-Founder of Lagos-based investment bank Comercio Partners, also attributed the divergence to differences in the way banks price credit and respond to changing monetary conditions.
Citing his firm’s analysis, Nwizu said that, among 174 comparable bank-sector prime lending rate observations across seven identified sectors, 65 recorded reductions, 79 remained unchanged and 30 increased.
He argued that the rise in average prime lending rates was therefore influenced by relatively large increases at a smaller number of banks rather than a uniform upward adjustment across the entire banking system.
The movement in lending rates has also coincided with a decline in the interest rates banks offer depositors.
The average savings deposit rate fell to 6.61 per cent in October 2026 from 7.81 per cent in August 2025. Average time-deposit rates dropped more sharply, declining from 14.52 per cent to 12.28 per cent, while average demand deposit rates slipped from 1.59 per cent to 1.48 per cent.
The reduction in deposit rates alongside elevated prime lending rates has drawn attention to the uneven adjustment of borrowing and savings costs across the banking system.
However, analysts cautioned against concluding that the latest CBN rate cut had failed to influence credit conditions. The September 22, 2026, reduction in the MPR occurred only 17 days before the October lending-rate observation cited in the report, leaving limited time for its full effects to become visible.
Nwizu noted that interest rate transmission in Nigeria has historically been asymmetric, with lending rates often responding more quickly when monetary policy tightens than when it eases. As a result, businesses may have to wait longer before lower benchmark rates translate into meaningful reductions in loan costs.
The implications for the real economy could be significant if borrowing costs remain high. For manufacturers, expensive credit raises the cost of financing raw materials, inventories, machinery and day-to-day operations. Agricultural businesses face similar pressures when financing inputs, equipment, storage and distribution.
In construction and real estate, elevated lending rates can make projects more expensive, weaken expected returns and delay development. Businesses in education, healthcare and technology may also reconsider expansion plans when financing costs consume a larger share of available revenue.
Abioye warned that persistently high rates for prime borrowers could discourage new borrowing, particularly for capital expenditure and long-term investment projects.
Nwizu similarly cautioned that sustained expensive credit could weaken private investment, reduce corporate profitability, slow business expansion and constrain employment creation.
These pressures could also complicate efforts to achieve sustainable reductions in inflation. When businesses face high financing costs, they may pass some of those expenses to consumers, postpone capacity expansion or reduce investment in productivity improvements.
Nevertheless, the analysts stressed that the effects are not uniform across all banks and sectors, and some borrowers have already benefited from lower quoted rates.
The latest findings place renewed attention on how effectively the CBN’s monetary easing is being transmitted through the financial system. Although lower policy rates can improve the conditions for cheaper credit, banks’ funding costs, liquidity requirements, credit risks and competitive pressures continue to shape the terms offered to customers.
For Nigerian businesses, the key question is whether the reductions in the benchmark rate will eventually produce more affordable loans capable of supporting production, investment and job creation.
Until that transmission becomes more consistent, the gap between monetary policy easing and the actual cost of borrowing could remain a major obstacle for companies seeking to expand and contribute to economic growth.
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