Nigerian businesses are currently battling soaring loan interest rates from commercial banks, ranging between 29% and 36%, adding pressure to an already fragile economy.
High lending rates have become a major constraint on economic growth, investment, and job creation.
Many companies, especially in the SME sector, say they can no longer afford new loans and are struggling to service existing ones.
According to analysts and bank officials who spoke to Nairametrics, these rates are driven by multiple factors: high inflation, elevated risk of defaults, increased cost of funds, and tighter monetary policy by the Central Bank of Nigeria (CBN).
Lending costs cripple operations
The CBN’s own data from early 2025 showed that 75% of businesses identified high interest rates as their most pressing operational constraint.
Staff at several banks confirmed that commercial loan rates hover in the low-to-mid 30% range, depending on the borrower’s profile. While there are concessions for select customers, most borrowers are left to deal with punishing repayment terms.
- “Interest rate for our commercial loans is between 32% and 35%. However, we may get approval or a waiver for some special customers for 30%,” a senior Fidelity Bank staff told Nairametrics.
A senior staff member of another Tier 2 bank, who requested anonymity, noted that commercial loan rates at his bank are between 32% and 36%, although federal government-backed loans like Creditcorp and mortgage facilities carry lower rates.
- “Creditcorp loans come in at 24% for personal lending backed by the FG. The Ministry of Finance-backed mortgage loan is even cheaper at 9.75%, though we haven’t started offering that yet,” he explained.
At Providus Bank, a senior staff member said interest rates for commercial loans typically range between 29% and 35%, depending on the structure and risk profile. Globus Bank reported slightly better terms, offering between 29% and 30%, while a UBA Plc representative pegged their rate at around 29%, also subject to client profile and negotiations.
- “It’s determined by the MPR,” the UBA official added. “We’re open to structuring deals based on value and the project’s nature.”
CBN’s tight policy stance
At the heart of these high lending rates is the CBN’s tight monetary policy stance.
With inflation still elevated, the CBN has raised its Monetary Policy Rate (MPR) to 27.50%, while maintaining a Cash Reserve Ratio (CRR) of 50% for commercial banks.
This means banks must lock away half of their deposits with the CBN, reducing the funds available for lending.
At the last Monetary Policy Committee meeting, CBN Governor Yemi Cardoso recently reiterated that inflation remains a top concern and that the bank will maintain its hawkish policy stance for as long as necessary.
- “Persistently high inflation justifies continued tightening. It may be a drag on growth, but price stability is the priority,” Cardoso said at a recent press conference.
The International Monetary Fund (IMF) has backed the CBN’s stance, calling it a “necessary response” to Nigeria’s macroeconomic instability. The Fund encouraged complementary fiscal and structural reforms to ease the burden on businesses.
“Rates over 30% are a death sentence” – Muda Yusuf
Former DG of the Lagos Chamber of Commerce and Industry and CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, criticized the current interest rate environment as harmful to investment and productivity.
- “Interest rates above 30% are simply too high for any business. No investment can survive this,” he told Nairametrics.
He identified two major issues with the current lending climate:
- High cost of credit – Making it nearly impossible for businesses to finance expansion or working capital needs.
- Short loan tenures – Most commercial bank loans are one to two years, which is unsuitable for long-term investment.
“You can’t support industrial growth with short-term funds. The cost and tenure mismatch is killing enterprise,” he added.
Interest rate spreads stifle growth
A report by CFG Advisory earlier in 2025 warned that the spread between deposit and lending rates is widening, reducing the flow of credit to the real economy. With deposit rates lingering around 5–7% and loan rates at 30%+, banks enjoy large margins while businesses suffer.
The report noted that this interest rate environment is:
- Stifling economic growth
- Reducing private sector credit
- Slowing GDP expansion
It called on the CBN to cut interest rates, explore targeted monetary easing, and coordinate with the fiscal side to boost non-oil exports and attract long-term capital.
CFG also recommended selling oil JV assets to raise revenues, targeting 8–10% growth and 12–14% inflation over the medium term.
Why it matters
Nigeria’s fragile recovery from years of slow growth, currency volatility, and declining investment may be undermined by persistently high lending rates.
- SMEs, which account for over 80% of jobs in Nigeria, are the most vulnerable. High interest rates mean many can’t afford to borrow, invest, or even meet payroll.
- The knock-on effect is fewer jobs, lower productivity, and weaker consumer spending.
- Even large corporates are beginning to delay capital expenditure projects or seek offshore financing options at better rates.
The business community is increasingly calling for a more balanced approach—one that still targets inflation, but without strangling credit and investment.
