Nigeria's banking sector raised its average maximum lending rate to 32.62 per cent in September 2026 from 29.20 per cent in August, even as the Central Bank of Nigeria's Monetary Policy Committee cut the Monetary Policy Rate to 23 per cent, according to CBN Money Market Indicators. The maximum lending rate sets the highest permissible interest rate that lenders can charge borrowers and is designed to protect borrowers from excessive charges.
Investigation data showed that most major Nigerian banks kept their manufacturing sector lending rates unchanged between September 4 and October 9, 2026, despite the 350 basis point rate cut. Access Bank, Alpha Morgan Merchant Bank and Coronation Merchant Bank held rates flat at 32.28 per cent, 35.00 per cent and 35 per cent respectively over the period. FCMB Bank, Fidelity Bank and First Bank of Nigeria maintained rates at 41.40 per cent, 36 per cent and 36 per cent respectively, though Citi Bank and Quest Merchant Bank each reduced manufacturing sector rates slightly during the same window.
The International Monetary Fund said in June 2026 that Nigerian banks display what economists call a 'rockets-and-feathers' pattern, rapidly raising lending rates during monetary tightening but slowly cutting them when policy eases. The IMF found that a 100 basis-point increase in the MPR typically pushes lending rates up by 175 to 180 basis points almost immediately, but a similar rate cut produces only a 25 to 30 basis-point decline in borrowing costs. The institution attributed weak deposit rate responses to limited competition among banks for customer deposits and the existence of captive depositors with few investment alternatives.
The average prime lending rate, which indicates the rate offered to the most creditworthy customers, rose to 19.04 per cent in September 2026 from 17.86 per cent in August, according to CBN data. This marked the highest prime lending rate since 2006, though it remains below the all-time high of 19.66 per cent recorded in November 2009.
Investment banker Tajudeen Olayinka said banks use the MPR as a guide rather than a direct benchmark, adjusting rates based on individual borrower risk profiles and market conditions. Vice President at Highcap Securities David Adonri attributed the increased lending rates to tight money supply in the credit market despite the massive MPR cuts. Analysts predict lending and prime rates may rise further as inflation figures continue to ease.
For borrowers and businesses seeking credit in Nigeria, the disconnect between the central bank's rate cuts and actual lending charges means that cheaper policy rates are not translating into lower borrowing costs in practice.