CBN Rate Cuts Fail to Lower Prime Lending Rates

​Despite aggressive monetary easing by the Central Bank of Nigeria (CBN), commercial banks have paradoxically increased average prime lending rates across major economic sectors, leaving top corporate borrowers facing tighter credit conditions.

​Data from the CBN reveals that over a 13-month easing cycle ending in September 2026, the apex bank slashed the Monetary Policy Rate (MPR) by a cumulative 450 basis points to 23 percent, driven by a declining inflation trajectory that dropped to 14.63 percent by September 2026. This policy shift was widely anticipated to lower borrowing costs and stimulate economic expansion.

​However, an analysis of CBN interest rate schedules shows that average prime lending rates—the preferential rates extended to highly creditworthy corporate entities—actually rose in eight out of eleven key economic sectors between August 2025 and October 2026.

​Sectoral Breakdown of Rising Prime Rates

​The increases in prime borrowing costs span several critical pillars of the productive economy, including:

• ​Agriculture, Forestry, and Fishing: Surged by 1.33 percentage points to 24.77 percent (up from 23.44 percent).
• ​Construction: Climbed to 26.40 percent from 25.25 percent.
• ​Government Borrowing: Advanced to 26.49 percent from 25.52 percent.
• ​Manufacturing: Increased to 24.36 percent from 23.79 percent.
• ​Other Affected Sectors: Real estate, education, human health and social work, and finance and insurance all recorded notable upward adjustments.

​Conversely, marginal declines in prime rates were observed only in arts, entertainment and recreation, oil and gas, and information and communication. Meanwhile, average maximum lending rates across ten sectors saw a modest decrease, moving from 33.78 percent down to 32.58 percent.

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​Behind the Asymmetric Transmission

​Financial analysts attribute the divergence between monetary policy easing and bank lending behavior to structural realities within the financial sector.

​Tunde Abioye, Head of Equity Research at Quest Merchant Bank, noted that lending rates are dictated by a combination of funding costs, liquidity conditions, and risk-adjusted pricing rather than the policy rate alone. He described the trend as a delayed and uneven transmission of monetary policy across different industries.

​Echoing this perspective, Nnamdi Nwizu, Co-Founder of Comercio Partners, explained that the upward shift in average prime rates was driven by significant adjustments at a select few institutions rather than a systemic policy failure. Out of 174 comparable bank-sector observations, 65 banks actually lowered their rates, 79 kept them unchanged, and only 30 implemented increases.

​Furthermore, Nwizu noted that the steep 350-basis-point reduction executed on September 22, 2026, occurred just weeks before the October data capture, suggesting that the full effects of the policy recalibration have yet to cascade through the banking architecture. This aligns with historical trends highlighted in recent International Monetary Fund (IMF) studies, which show that Nigerian lending rates respond sluggishly to monetary easing compared to rapid tightening cycles.

​Falling Deposit Rates Contrast With Credit Costs

​The reluctance of banks to cheapen credit for prime borrowers stands in sharp contrast to the downward adjustments applied to customer deposits. Over the same timeframe:

• ​Savings Deposit Rates: Declined by 1.20 percentage points to average 6.61 percent.
• ​Time-Deposit Rates: Suffered a sharper drop of 2.24 percentage points, averaging 12.28 percent.
• ​Demand Deposit Rates: Experienced a marginal decrease to 1.48 percent.

​Economic Implications

​Market experts warn that if prime lending rates remain stubbornly high, it could stifle private sector investment and corporate profitability. Sectors heavily reliant on working capital and raw material financing—such as manufacturing, agriculture, and real estate—are particularly vulnerable. Analysts caution that persistent high borrowing costs risk undermining corporate expansion plans, slowing employment creation, and complicating broader macroeconomic objectives to secure sustainable disinflation.