The Central Bank of Nigeria’s successive interest rate cuts have yet to translate into lower borrowing costs for many preferred corporate customers, as commercial banks raised average prime lending rates in eight major sectors of the economy.
Findings from the CBN’s published interest rate schedules, analysed by Financial Vanguard, showed that average prime lending rates increased in agriculture, construction, government, health, real estate, manufacturing, education, and finance and insurance between August 2025 and October 2026.
Agriculture, forestry and fishing recorded the highest increase, with the average prime rate rising by 1.33 percentage points to 24.77 per cent from 23.44 per cent.
Construction lending rates climbed to 26.40 per cent from 25.25 per cent, while manufacturing increased to 24.36 per cent from 23.79 per cent.
In real estate, the average rate rose to 26.57 per cent from 25.82 per cent. Education recorded an increase to 26.85 per cent from 26.33 per cent, while government borrowing rates climbed to 26.49 per cent from 25.52 per cent.
The increases came despite a cumulative 450-basis-point reduction in the Monetary Policy Rate (MPR) over 13 months.
The CBN lowered the benchmark rate from 27.5 per cent to 27 per cent in September 2025 and further reduced it to 26.5 per cent in February 2026. In September 2026, the apex bank announced a more substantial reduction of 350 basis points, bringing the MPR to 23 per cent.
The decisions followed a moderation in inflation, which declined from 15.93 per cent in May 2026 to 15.39 per cent in August and 14.63 per cent in September.
Despite the reductions, average prime lending rates fell only in three sectors: arts, entertainment and recreation; oil and gas; and information and communication.
The trend, however, was different for maximum lending rates. Financial Vanguard’s analysis showed that average maximum rates declined across 10 sectors, dropping from 33.78 per cent to 32.58 per cent.
The figures suggest that while some borrowers have begun to benefit from lower lending rates, the adjustment has not been uniform, particularly for creditworthy corporate customers who typically qualify for preferential rates.
Why banks are not cutting rates uniformly
Tunde Abioye, Head of Equity Research at Quest Merchant Bank, said the difference between the CBN’s benchmark rate and sectoral prime lending rates did not necessarily mean monetary policy was failing.
He explained that commercial banks consider their funding costs, liquidity positions, borrower profiles and risk assessments when setting interest rates.
Abioye said the figures could indicate that the effect of monetary easing was taking time to filter through the banking system.
Nnamdi Nwizu, Co-Founder of Comercio Partners, also attributed the differences to variations in banks’ credit-pricing decisions.
Citing his firm’s analysis, he said 65 of 174 comparable bank-sector prime lending rate observations recorded reductions, 79 remained unchanged and 30 increased.
He said the figures showed that the rise in average prime lending rates was largely influenced by substantial increases at a relatively small number of banks, rather than a widespread upward adjustment across the industry.
Depositors also earn less
While some borrowers continue to face high interest rates, depositors have also experienced declining returns on their savings.
The average savings deposit rate fell to 6.61 per cent in October 2026 from 7.81 per cent in August 2025.
Time-deposit rates recorded a sharper decline, dropping from 14.52 per cent to 12.28 per cent, while demand deposit rates eased from 1.59 per cent to 1.48 per cent.
Nwizu said the reductions in deposit rates and maximum lending rates indicated that some repricing had occurred, but the transmission of lower policy rates to prime borrowers remained incomplete.
He also pointed out that the CBN’s September 22, 2026, MPR reduction came only 17 days before the October lending-rate figures were observed.
According to him, the period was too short to determine the full effect of the adjustment on borrowing costs.
He cited a June 2026 study by the International Monetary Fund, which highlighted the uneven transmission of interest rate changes in Nigeria, with lending rates tending to respond more quickly to increases than to reductions in the policy rate.
High borrowing costs threaten investment
The continued rise in prime lending rates could have implications for businesses seeking funds for expansion, equipment purchases and day-to-day operations.
Abioye warned that elevated rates could make borrowing less attractive, particularly for discretionary expansion, capital expenditure and long-term investments.
Nwizu said expensive credit could undermine investment, reduce corporate profitability and limit businesses’ capacity to expand and create jobs.
He noted that manufacturers and agricultural businesses could face higher costs when financing raw materials, inventories and working capital.
For real estate developers, increased financing costs could affect project viability and delay new developments. Businesses in education, information technology and financial services could also reconsider expansion plans.
Nwizu warned that sustained high borrowing costs could weaken private investment and constrain improvements in productive capacity, potentially complicating efforts to achieve sustainable disinflation.
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