Nigerian businesses are reeling under crushing loan costs, with commercial bank interest rates now ranging between 29% and 36%. The rising rates, fueled by persistent inflation and tight monetary policies from the Central Bank of Nigeria (CBN), have left many companies, especially small and medium enterprises (SMEs), struggling to service existing loans or access new credit. For businesses already battling currency volatility and weak consumer demand, the cost of borrowing has become a make-or-break challenge.
Bank officials confirm that most commercial loan rates now hover in the low-to-mid 30% range, though some institutions grant select concessions at slightly lower rates. At Providus Bank, lending costs range between 29% and 35%, while UBA Plc pegs its average at 29% depending on client negotiations. By contrast, government-backed Creditcorp loans stand at 24%, and mortgage facilities supported by the Ministry of Finance are priced below 10%, though access to such programs remains limited. The disparity has widened the gap between SMEs and larger corporates, with smaller players bearing the brunt.
The CBN has defended its tight stance, raising the Monetary Policy Rate (MPR) to 27.5% and maintaining a steep 50% cash reserve requirement for banks in an effort to rein in inflation. Governor Yemi Cardoso insists that price stability must remain the priority, even if higher lending rates dampen growth. The International Monetary Fund (IMF) has backed this approach, describing it as a “necessary response” to Nigeria’s economic volatility. Yet, for businesses, the immediate reality is shrinking credit and mounting repayment burdens.
Industry experts warn that interest rates above 30% are unsustainable for growth. Dr. Muda Yusuf, former Director-General of the Lagos Chamber of Commerce and Industry, described the current environment as a “death sentence” for investment. He emphasized that businesses cannot thrive on short-term loans of one to two years with such prohibitive costs, noting that the mismatch between loan terms and investment needs is “killing enterprise.” Analysts further highlight that the spread between deposit rates—around 5–7%—and lending rates exceeding 30% only benefits banks while strangling private sector expansion.
The broader economic implications are sobering. SMEs, which generate more than 80% of jobs in Nigeria, are cutting back on borrowing, delaying expansion, and in some cases struggling to meet payroll. Larger corporations are beginning to shelve capital projects or turn to offshore financing at better rates. Economists warn that unless interest rates ease, Nigeria risks undermining its fragile recovery, slowing GDP growth, and worsening unemployment. For many business owners, the call is clear: Nigeria needs a more balanced approach that fights inflation without suffocating enterprise.
Source: Nairametrics