The average maximum lending rate in Nigeria climbed to 30.28% in October 2024, marking its highest level since February 2022. This increase aligns with the Central Bank of Nigeria’s (CBN) decision to hike the Monetary Policy Rate (MPR) to 27.25%, aimed at curbing double-digit inflation and stabilizing the financial system. However, this move has significantly raised borrowing costs, creating additional hurdles for businesses and individuals in an already challenging economic environment.
The steep rise in lending rates has affected both the manufacturing sector and the general economy. The Manufacturers Association of Nigeria (MAN) reported that the average maximum lending rate increased to 35% in Q2 2024, contributing to a decline in sector performance. Similarly, prime lending rates have also risen, reflecting tighter financial conditions as banks adjust their rates based on MPR signals and internal cost structures. Analysts predict further increases amid persistently high inflation and currency instability.
Despite the economic strain, the International Monetary Fund (IMF) has praised the CBN’s commitment to tackling inflation through aggressive monetary tightening. However, critics argue that the policies could suppress consumer spending and slow economic growth. With lending rates varying significantly across banks, businesses and consumers face rising credit costs, signaling a prolonged period of financial challenges under current monetary conditions.
