By LOVETH-AZODO CHIJIOKE, Lagos.
Despite the aggressive 350-basis-point reduction of the benchmark Monetary Policy Rate (MPR) to 23 per cent by the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) at its recent statutory meeting, the banking sector’s average maximum lending rate climbed to 32.62 per cent in September 2026.
Data extracted from the CBN’s Money Market Indicators shows that the 32.62 per cent recorded in September represents a sharp 342-basis-point escalation from the 29.20 per cent reported in August 2026, frustrating expectations of an immediate drop in corporate borrowing costs.
The maximum lending rate which reflects the highest permissible interest rates charged to perceived high-risk borrowers and non-prime commercial debtors has remained volatile throughout the year. The indicator opened the year at 32.68 per cent in January 2026 when the MPR stood at 27 per cent, peaking at 35.17 per cent in March when the policy rate was pegged at 26.50 per cent.
Routine regulatory disclosures and published interest rate schedules across deposit money banks indicate that lending rates across major manufacturing credit lines held steady between early September and October 9, 2026, defying the apex bank’s easing posture.
During the five-week window, quoted maximum lending rates to the manufacturing sub-sector by commercial institutions, including Access Bank, Alpha Morgan Merchant Bank, Coronation Merchant Bank, and Ecobank, stayed largely flat within the 32.28 per cent to 35.00 per cent range.
Similarly, First City Monument Bank (FCMB), Fidelity Bank Plc, and First Bank of Nigeria maintained manufacturing lending ceilings of 41.40 per cent, 36.00 per cent, and 36.00 per cent, respectively.
However, a few lenders adjusted their pricing downward. Citi Bank lowered its manufacturing maximum lending rate from 20 per cent to 19 per cent, while Quest Merchant Bank scaled back its lending band from 35 per cent to 30 per cent over the same period.
The sluggish transmission of monetary easing to real-sector lending rates mirrors concerns raised by the International Monetary Fund (IMF).
The multilateral institution had pointed out that Nigerian banks exhibit an asymmetric “rockets-and-feathers” pricing pattern swiftly hiking loan rates during policy tightening cycles, but showing extreme reluctance to lower borrowing costs when the regulator pivots to rate cuts.
According to IMF findings, while a 100-basis-point hike in the MPR historically pushes lending rates and treasury yields up by 175 to 180 basis points almost immediately, a corresponding rate cut typically yields a meager 25 to 30-basis-point decline in borrowing charges. The fund attributed this structural rigidity to persistent liquidity distortions and limited competition for deposits among financial institutions.
The trend was equally evident in prime credit pricing. The CBN data revealed that the average prime lending rate offered exclusively to top-tier, low-risk corporate institutions advanced to 19.04 per cent in September 2026, up from 17.86 per cent in August. Earlier in January 2026, the prime rate had touched 19.54 per cent, hovering near its historical peak of 19.66 per cent established in November 2009.
Market analysts note that the stickiness of credit costs reflects fundamental risk-pricing dynamics in the domestic economy rather than a failure of monetary directives.
Reacting to the trend, Investment Banker and Stockbroker, Mr. Tajudeen Olayinka, explained that the MPR serves primarily as an indicative reference rate rather than an absolute statutory ceiling for commercial risk assets.
“Commercial banks are not compelled to automatically adjust lending rates solely because of an MPR cut; rather, they use it as an anchor to price and reprice loans and advances based on the risk-return framework of each applicant,” Olayinka stated. “The adjustment to 23 per cent aligns with market realities, but only prime borrowers with sovereign-grade credit profiles will access rates close to the MPR. Real lending rates remain a direct function of credit risk, deposit costs, and market liquidity.”
Corroborating this perspective, the Vice President of Highcap Securities, Mr. David Adonri, observed that despite the headline rate reduction, structural liquidity constraints in the credit market continued to push rates higher in September.
In its quarterly macroeconomic review, Cordros Research noted that the ultimate impact of the MPC’s rate cut will depend on how quickly interbank liquidity translates into lower market yields and reduced cost of funds for corporations.
“Continued macroeconomic stability, particularly in domestic price levels and foreign exchange supply, will remain vital to investor sentiment and credit pricing. Going into the fourth quarter, corporate balance sheets, full-year earnings expectations, and liquidity flows will dictate borrowing terms across the banking hall,” the research firm noted.
With headline inflation showing signs of moderation, financial market operators anticipate that competitive pressure and prospective liquidity injections may eventually compel deposit money banks to soften lending terms toward the end of the year.
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