Amid a steep rise in the Central Bank of Nigeria’s (CBN) Monetary Policy Rate (MPR), Nigerian banks generated N6.5 trillion in income from loans and advances in the first nine months of 2024, a 118% increase from the previous year. Access Holdings, Zenith Bank, and Ecobank led the surge with triple-digit growth in loan incomes due to the higher interest rates. The average maximum lending rate rose to 30.21% by September 2024, reflecting the impact of tighter monetary policies aimed at controlling inflation and stabilizing the naira.
The CBN, under the leadership of Governor Yemi Cardoso, raised the MPR five times in 2024, reaching 27.25% in September. These measures are part of broader efforts to tackle inflation, which hit a record 32.7% year-on-year in September. While the banks have benefited from the increased interest on loans, the policy has sparked concerns about the burden on businesses, particularly small and medium enterprises (SMEs), facing elevated borrowing costs in an already challenging economic environment.
Analysts predict that interest rates will remain high as the CBN continues its monetary tightening. Experts like Tajudeen Olayinka and Omordion Ambrose warn that prolonged high rates could stifle business growth and competitiveness. Fitch Ratings echoed these concerns, highlighting the challenges of achieving macroeconomic stability without further tightening. Despite these challenges, the banking sector has continued to thrive, leveraging increased interest income from loans and advances.