Relief as Banking Sector Lending Rate to Businesses Drop to 29.19%

Kayode Tokede

Amidst outcry by businesses in Nigeria over the high cost of borrowing, the banking sector average maximum lending rate closed August 2026 at 29.20 per cent, about 3.96 per cent drop when compared to 33.16 per cent in July 2026.

According to the Central Bank of Nigeria (CBN) “Money Market Indicator”, the 29.19 per cent average maximum lending is the lowest this year amid a drop in the Monetary Policy Rate (MPR) to 26.50 per cent from 27 per cent.

Maximum lending rate refers to the highest permissible interest rate that Nigerian banks can charge borrowers. The rate is crucial for ensuring fair lending practices in the Nigerian banking sector and protecting borrowers from excessive interest rates.

Analysis of CBN data revealed that the average maximum lending rate reached a peak of 35.17 per cent in February 2026 from 32.68 per cent in January 2026 despite the Monetary Policy Committee of CBN reducing MPR to 26.50 per cent.

As of July 26, 2026, market data showed that Stanbic IBTC, followed by Ecobank,and FCMB Bank had the highest “General” maximum lending rate in Nigeria’s financial sector during the period.

Stanbic IBTC’s general average maximum lending rate closed at 60 per cent, while Ecobank and FCMB Bank were at 48 per cent and per cent, respectively.

The data showed that Citi Bank, Rand Merchant Bank Nigeria Limited had “General” maximum lending of 20 per cent in the period under review.

Before now, the International Monetary Fund (IMF) had responded to the unchanged average average maximum lending rate in the Nigerian banking sector between February and April 2026 , expressing that banks raise lending rates rapidly when monetary policy is tightened but are slower to reduce borrowing costs or increase returns to savers.

“Interest rate transmission displays a clear “rockets-and-feathers” pattern, with borrowing rates adjusting upward rapidly during tightening cycles but declining only gradually when policy is eased,” IMF said

“When the CBN tightens, wholesale and lending rates respond strongly and more than proportionally: a 100 basis-point MPR hike raises T-bill and lending rates by roughly 175–180 basis points on impact, whereas a comparable cut lowers them by only about 25–30 basis points.

“This asymmetry – statistically significant – implies that banks transmit tightening rapidly and even amplify it but adjust much more slowly during easing cycles. By contrast, while the interbank rate responds symmetrically (around 0.6 in both directions) and deposit rates show little response either way (around 0.12), both are not significant,” the report by the IMF had stated.

In 2025, the maximum lending rate was 29.32 per cent, when the MPC voted to retain the MPR at 27.00 per cent from 27.50 per cent.

The average maximum lending rate has sparked concerns regarding the potential impact on the cost of credit for businesses already facing economic hardships due to foreign exchange unification and fuel subsidy removal by the Federal Government.

CBN data revealed that the average maximum lending rate rose to 29.79 per cent in January 2025 from 29.71 per cent in December 2024 when MPC members of CBN voted to retain MPR to 27.50 per cent.

According to CBN’s data the average prime lending rate also dropped to 17.86 per cent in August 2026 from 19.06 per cent reported by CBN in July 2026.

The prime lending rate is the interest rate that banks charge their most creditworthy customers, usually large corporations and it serves as a benchmark for many other loans, including personal and business loans.

Speaking on the possibility of a cut in interest by the Monetary Policy Committee (MPC) of the CBN, analysts at Cordros Research noted that the global and domestic developments since the July 2026 meeting strongly favour the MPC maintaining its current policy stance.

They said, “Globally, major central banks are adopting a more hawkish stance, providing no external impetus for the CBN to ease policy. Domestically, the resumption of disinflation, robust growth, improved external buffers, and relative exchange rate stability provide immediate justification for easing. At the same time, elevated liquidity in the financial system remains a consideration for the MPC.

“Taken together, these global and domestic dynamics lead us to suggest that the MPC will maintain the MPR at 26.50per cent at the meeting, resulting in a HOLD decision. We also expect the Committee to adjust the Standing Facilities Corridor to +50/–500 basis points around the MPR. All other policy parameters are expected to remain unchanged.”

They noted that the 307th MPC meeting convenes against a backdrop of stronger growth, the resumption of disinflation, a firmer naira, higher foreign exchange reserves, elevated system liquidity and a tightening global monetary policy landscape.

“Against this backdrop, we expect the MPC to maintain the MPR at 26.50per cent while adjusting the Standing Facilities Corridor to +50/–500basis points around the MPR, bringing the effective SDF rate to 21.5per cent and the SLF rate to 27.0per cent. All other parameters are expected to remain unchanged, including CRR for DMBs at 45.00per cent, the CRR for Merchant Banks at 16.00per cent, the CRR for non-TSA public sector deposits at 75.00per cent, and the liquidity ratio at 30.00per cent.

“For investors, the expected decision should preserve the relative attractiveness of naira carry positions and support near term yield stability. We see the November 2026 MPC meeting as the next potential window for a policy pivot, conditional on the disinflation trajectory remaining intact,” they explained.