Nigeria’s Prime Lending Rate Hits 18.88% Amid 27% Monetary Policy Rate: Banks Adjust to Economic Signals
Nigeria’s average prime lending rate increased to 18.88% in August 2025, up from 18.54% in July, reflecting banks’ response to the Central Bank of Nigeria’s (CBN) slight reduction of the Monetary Policy Rate (MPR) to 27%. The prime lending rate, which applies to the most creditworthy corporate clients, has steadily edged higher this year due to improving macroeconomic indicators, easing inflation, and CBN efforts to stimulate lending, particularly in agriculture, manufacturing, and small- and medium-sized enterprises.
While the national average sits at 18.88%, individual banks show significant variation. Access Bank charges 25.5% for government loans, Ecobank 26.75%, and FCMB 20%, whereas some banks like Wema Bank reported unusually high rates at 332.5%—likely an outlier or reporting error. The maximum lending rate, which applies to higher-risk borrowers, slightly declined to 29.13% in August from 29.31% in July, the lowest in 2025 so far. Analysts note these disparities reflect banks’ cost of funds, risk assessments, and market conditions rather than direct alignment with the MPR.
The CBN has introduced multiple measures to ease monetary conditions for the private sector while safeguarding currency stability. These include adjusting the MPR corridor to +250/-250 basis points, reducing the Cash Reserve Ratio (CRR) for deposit money banks to 45%, and imposing a 75% CRR on non-Treasury Single Account public sector deposits to control excess liquidity. According to Cordros Research, these steps are intended to support private sector credit, strengthen monetary policy transmission, and reinforce the ongoing disinflationary trend.
Investment experts suggest banks will continue adjusting their lending rates in line with market signals rather than using MPR as a strict benchmark. Investment banker Tajudeen Olayinka explained that banks consider deposit mixes, liquidity, and cost of funds when setting prime rates. Similarly, Cordros Research and Highcap Securities analysts anticipate gradual monetary easing in the coming months, driven by moderating inflation and stable foreign exchange markets, which could influence lending rates further.
Rising prime lending rates come at a challenging time for businesses navigating economic adjustments such as fuel subsidy removal and foreign exchange unification. While MPR adjustments are intended to stimulate lending, analysts warn that the cost of credit could continue to weigh on businesses, particularly smaller firms. Forecasts indicate headline inflation may trend toward 18% by October, potentially prompting further policy shifts at the CBN’s November Monetary Policy Committee meeting.
source: This day