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 Naijaonpoint, 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).
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.
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.
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.
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.
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.
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.
He identified two major issues with the current lending climate:
“You can’t support industrial growth with short-term funds. The cost and tenure mismatch is killing enterprise,” he added.
“You can’t support industrial growth with short-term funds. The cost and tenure mismatch is killing enterprise,” he added.
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:
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.
Nigeria’s fragile recovery from years of slow growth, currency volatility, and declining investment may be undermined by persistently high lending rates.
The business community is increasingly calling for a more balanced approach—one that still targets inflation, but without strangling credit and investment.