The Central Bank of Nigeria’s latest disclosure of commercial and merchant banks’ lending rates shows that the cost of borrowing continues to vary widely across the banking industry, with prime lending rates ranging from as low as 19.5 percent to more than 40 percent, depending on the lender and the borrower’s credit profile.
The figures, published on July 3 under the apex bank’s consumer protection and transparency framework, come ahead of next week’s Monetary Policy Committee (MPC) meeting, where most analysts expect policymakers to leave the benchmark Monetary Policy Rate (MPR) unchanged at 26.5 percent after a 50-basis-point reduction in February.
While the rate cut was expected to gradually ease financing conditions, the latest data suggest borrowing costs remain elevated for many customers.
The CBN’s monthly publication is designed to give households, small businesses and corporate borrowers greater visibility into how banks price loans before they approach a lender.
What do the published rates mean?
The disclosure contains two sets of lending rates.
The prime lending rate is the rate banks offer customers considered to pose the least credit risk. These are typically large companies, well-established businesses and individuals with strong credit histories, stable income and adequate collateral.
The maximum lending rate, on the other hand, represents the highest rate a bank may charge borrowers perceived to carry greater risk. These are often customers with weaker credit profiles, unsecured facilities or businesses operating in sectors banks consider riskier.
The actual interest rate paid by a borrower may differ from the published figures, depending on factors such as the size of the loan, repayment period, collateral, relationship with the bank and the borrower’s creditworthiness.
Which banks offer the lowest lending rates?
Among the country’s major commercial lenders, Guaranty Trust Bank (GTBank), Nigeria’s most valuable lender, posted the lowest prime lending rate at 21.0 percent, while its maximum lending rate stood at 32.0 percent.
Zenith Bank followed with a prime lending rate of 23.62 percent and a maximum rate of 32.0 percent. Access Bank quoted a prime rate of 25.5 percent, also with a maximum lending rate of 32.0 percent.
First Bank of Nigeria published a prime lending rate of 26.0 percent and a maximum rate of 38.0 percent, while Ecobank’s prime rate stood at 26.75 percent, with a ceiling of 48.0 percent.
United Bank for Africa (UBA) disclosed a prime lending rate of 28.5 percent and a maximum rate of 32.0 percent.
Among merchant banks, Rand Merchant Bank Nigeria recorded the lowest published rate, quoting both its prime and maximum lending rates at 19.5 percent, indicating little or no distinction in pricing between low- and high-risk borrowers.
Quest Merchant Bank reported a prime lending rate of 5.0 percent and a maximum rate of 32.5 percent, while Signature Bank did not publish figures for either category.
Where are borrowing costs highest?
Some lenders continue to charge substantially higher rates.
Tatum Bank recorded a prime lending rate of 41.65 percent and a maximum lending rate of 46.65 percent, the highest prime rate among banks that published data.
Nova Bank quoted a prime rate of 33.78 percent and a maximum rate of 39.0 percent.
FCMB disclosed a prime lending rate of 31.0 percent and a maximum rate of 46.0 percent.
Stanbic IBTC reported the widest gap between its published rates, with a prime lending rate of 1.0 percent and a maximum lending rate of 60.0 percent, the highest maximum rate in the latest disclosure.
The unusually low prime rate suggests it may apply only to a limited category of facilities or customers rather than the bank’s broader lending portfolio.
Why do lending rates differ so much?
Although the CBN sets the Monetary Policy Rate as the benchmark for interest rates in the economy, banks determine their lending rates based on several other considerations.
These include their cost of raising deposits, operating expenses, liquidity position, expected inflation, regulatory requirements and, most importantly, the risk associated with each borrower.
A customer with strong financial statements, a proven repayment record and adequate collateral is generally able to negotiate a lower lending rate than a borrower with weaker financial credentials.
The sectors in which businesses operate also influence pricing, as banks often assign higher risk premiums to industries with greater uncertainty or higher default rates.
Will borrowing costs fall if the MPC holds rates?
Attention is now shifting to next week’s MPC meeting, where economists expect the central bank to keep the benchmark interest rate unchanged due to the renewed tension between the US and Iran that has pushed oil prices to $85 per barrel.