Kayode Tokede
The average maximum lending rate charged by Nigerian banks declined to 33.16 per cent in June 2026, easing from 34.78 per cent in May, as the Central Bank of Nigeria (CBN) sustained its monetary policy pause amid improving macroeconomic conditions.
The latest Money Market Indicators released by the apex bank showed that although borrowing costs remained high, the moderation in banks’ maximum lending rates coincided with the Monetary Policy Committee’s (MPC) decision to retain the Monetary Policy Rate (MPR) at 26.50 per cent, since February.
While the lending rate is the highest interest rate charged on loans given to customers, the cost of borrowing is the total expense incurred by a customer in obtaining and servicing a loan.
The report showed that despite the monthly decline in average maximum lending, lending costs remained significantly higher than a year earlier.
The CBN data indicated that the average maximum lending rate stood at 29.51 per cent in June 2025, underscoring a year-on-year increase of 3.65 percentage points.
The maximum lending rate represents the highest interest rate banks may charge borrowers and serves as a key indicator of credit conditions within the economy.
Businesses and investors closely monitor it because of its direct impact on borrowing costs, investment decisions and overall economic activity.
The latest moderation marks only the second notable decline in lending rates this year, following the MPC’s decision in February to reduce the benchmark interest rate from 27 per cent to 26.50 per cent before subsequently maintaining the status quo.
At its meeting last week, the MPC unanimously voted to retain all policy parameters, citing continued exchange rate stability, moderating inflationary pressures and the need to guard against external shocks.
The CBN governor, Mr. Olayemi Cardoso, said the committee’s decision reflected a careful assessment of both domestic economic conditions and prevailing global risks, including uncertainty surrounding the United States economy and persistent geopolitical tensions in the Middle East.
The CBN data showed that the average maximum lending rate opened the year at 32.68 per cent in January before rising sharply to 35.17 per cent in February, even as the apex bank reduced the policy rate to 26.50 per cent.
The lending rate subsequently remained unchanged at 35.17 per cent throughout February, March and April, highlighting what analysts describe as the banking sector’s slow transmission of monetary easing to borrowers.
The International Monetary Fund (IMF) had earlier drawn attention to this pattern, arguing that Nigerian banks adjust lending rates more rapidly when monetary policy is tightened than when it is relaxed.
In its assessment of Nigeria’s monetary transmission mechanism, the Fund described the behaviour as a classic “rockets-and-feathers” phenomenon.
According to the IMF, borrowing costs rise swiftly during periods of monetary tightening but decline only gradually when policy is eased.
The Fund noted that a 100-basis-point increase in the MPR typically pushes Treasury bill yields and lending rates higher by about 175 to 180 basis points. In contrast, a similar reduction in the benchmark rate lowers lending rates by only 25 to 30 basis points.
It explained that while interbank rates responded relatively symmetrically to policy changes, deposit rates exhibited only a marginal reaction, suggesting that the benefits of monetary easing were transmitted to borrowers and savers much more slowly than the costs associated with policy tightening.
Historical CBN data showed that the average maximum lending rate stood at 29.32 percent in 2025, when the MPC retained the MPR at 27 percent after an earlier reduction from 27.50 percent.
The figures also revealed that the lending rate rose to 29.79 per cent in January 2025 from 29.71 per cent in December 2024, despite the decision to keep the policy rate unchanged.
The elevated cost of borrowing has continued to generate concern among manufacturers, small businesses and other private sector operators already grappling with the effects of foreign exchange reforms, higher energy costs and the removal of petrol subsidies.
Market analysts, however, expect lending rates to moderate further in the coming months if inflation continues its downward trajectory, exchange rate stability is sustained, and the CBN maintains its current monetary policy stance, although they caution that banks are likely to remain conservative in passing lower funding costs to borrowers.
This Day
Punch Nigeria