Banks raise lending rates for top borrowers despite CBN cuts

*Raise prime rates in 8 sectors, cut maximum rates *Agric, construction, manufacturing face higher rates *Analysts warn of delayed impact of CBN rate cuts By Babajide Komolafe, Economy Editor Despite interest rate reductions by the Central Bank of Nigeria (CBN), banks have raised average prime lending rates in several key sectors of the economy, defying expectations of cheaper loans for businesses across the country.

Read Also: Why food security remains intractable The CBN in September 2025 announced the first reduction in the Monetary Policy Rate (MPR), the financial market interest rate benchmark, to 27 per cent from 27.5 per cent, followed by another 50 basis points (bpts) reduction to 26.5 per cent in February 2026, and a massive 350 bpts cut to 23 per cent in September 2026.

The latest reduction in the MPR followed a three consecutive month downward trend in the inflation rate to 15.39 per cent in August 2026 from 15.93 per cent in May 2026. This moderation continued in September when the inflation rate dropped to 14.63 per cent. The 450bpts reduction in the MPR in the 13 months to September 2026 had fuelled expectations that banks will reduce lending rates thus providing relief for businesses and households.

However, Financial Vanguard findings from the CBN’s published interest rate schedules for August 2025 and October 2026 show that average prime lending rates — the preferential rates extended to creditworthy corporate borrowers — increased in eight of 11 key economic sectors. The eight sectors are agriculture, forestry and fishing; construction; government; human health and social work; real estate; manufacturing; education; and finance and insurance.

The increases ranged from 0.33 percentage points in finance and insurance to 1.33 percentage points in agriculture, forestry and fishing. Average prime lending rates in agriculture, forestry and fishing rose to 24.77 per cent from 23.44 per cent, while construction increased to 26.40 per cent from 25.25 per cent. Government borrowing rates rose to 26.49 per cent from 25.52 per cent, while human health and social work advanced to 26.96 per cent from 26.11 per cent.

In real estate, the average prime rate increased to 26.57 per cent from 25.82 per cent, while manufacturing rose to 24.36 per cent from 23.79 per cent. Education increased to 26.85 per cent from 26.33 per cent, and finance and insurance rose to 25.88 per cent from 25.55 per cent. However, prime lending rates declined marginally in arts, entertainment and recreation, oil and gas, and information and communication, falling by 0.66, 0.24 and 0.08 percentage points, respectively.

The development contrasts with a decline in average maximum lending rates across 10 sectors — arts and entertainment, government, education, human health, finance and insurance, manufacturing, oil and gas, agriculture, information and communication, and construction — from 33.78 per cent to 32.58 per cent, representing a reduction of 1.20 percentage points.

The Financial Vanguard analysis indicated that while some borrowers may be benefiting from lower quoted lending rates, preferred customers in important segments of the productive economy have yet to experience a uniform reduction in borrowing costs. Uneven transmission of rate cuts Commenting on the development, Tunde Abioye, Head, Equity Research, Quest Merchant Bank, said the divergence between the Monetary Policy Rate (MPR) and sectoral prime lending rates did not necessarily indicate a breakdown in monetary policy transmission.

He explained, “Lending rates reflect not only the policy rate but also banks’ funding costs, liquidity conditions, borrower mix and risk-adjusted pricing considerations. ‘‘What the data may be showing is a lagged and uneven transmission of monetary easing across sectors rather than an outright failure of the easing cycle to lower borrowing costs.” Citing an independent analysis of the CBN’s rate publications conducted by his bank, Nnamdi Nwizu, Co-Founder, Comercio Partners, a Lagos based investment bank, also attributed the divergence to uneven transmission and differences in how banks price credit.

He said: “The divergence reflects the uneven transmission of monetary policy into bank lending rates, alongside differences in how individual banks price credit. “Although CBN has reduced its benchmark policy rate, commercial banks determine lending rates based on several considerations, including funding costs, liquidity requirements, operating expenses, credit risks and competitive conditions.

“Our analysis suggests that the increase in average prime lending rates was not widespread across banks. Of the 174 comparable bank-sector prime lending rate observations across the seven identified sectors, 65 recorded reductions, 79 remained unchanged and only 30 recorded increases. “This suggests that the increase in average prime lending rates was influenced by relatively large upward adjustments at a smaller number of banks, rather than a general