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Nigerian businesses are grappling with soaring loan interest rates from commercial banks, currently ranging between 29% and 36%, piling pressure on an already fragile economy.

High lending rates have become a significant barrier to economic growth, stifling investment and job creation. Many companies, particularly in the small and medium-sized enterprise (SME) sector, say they can no longer afford fresh loans and are struggling to service existing debts.

Analysts and bank officials who spoke with Nairametrics attributed the elevated rates to several factors, including high inflation, increased default risks, the rising cost of funds, and the Central Bank of Nigeria’s (CBN) tight monetary policy.

According to CBN data from early 2025, 75% of Nigerian businesses identified high interest rates as their most pressing operational challenge.

Staff at multiple banks confirmed that most commercial loans now hover within the low-to-mid 30% range, though some clients receive limited concessions.

“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 member told Nairametrics.

A senior staff member of another Tier 2 bank, who requested anonymity, said commercial loan rates at his institution range between 32% and 36%. He added, however, that federal government-backed facilities provide some relief.

“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 disclosed that interest rates for commercial loans typically fall between 29% and 35%, depending on the structure and risk profile. Globus Bank reported slightly better terms of 29% to 30%, while a UBA Plc representative pegged their rates around 29%, also subject to client profile and negotiations.

“It’s determined by the MPR,” the UBA official explained. “We’re open to structuring deals based on value and the project’s nature.”

CBN’s Tight Monetary Policy

At the core of the steep lending environment is the CBN’s hawkish policy stance. With inflation still running high, the bank has raised the 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 liquidity and limiting funds available for lending.

CBN Governor Yemi Cardoso, speaking at the last Monetary Policy Committee meeting, stressed that controlling inflation remains the top priority.

“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 endorsed the CBN’s position, describing it as a “necessary response” to Nigeria’s macroeconomic instability. The Fund also urged complementary fiscal and structural reforms to reduce the financial burden on businesses

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