Nigerian Banks Adjust Lending Rates Amid Central Bank’s MPR Hike

Commercial and merchant banks across the country have adjusted their lending rates in response to the Central Bank of Nigeria’s (CBN) recent decision to raise the Monetary Policy Rate (MPR).

This move comes as a direct reaction to the CBN’s efforts to curb inflation and stabilize the economy.

Effective May 2024, the MPR saw a substantial increase of 750 basis points, bringing it to 26.25 percent, up from 18.75 percent in July 2023.

This significant hike has prompted a wave of rate adjustments across 25 out of 31 lending financial institutions, which now offer maximum borrowing interest rates above the MPR for various sectors of the economy.

Conversely, six lenders provide loans at rates below the benchmark interest rate.

Access Bank, for instance, has set its maximum lending rate at 28.50 percent for customers in agriculture, forestry, and manufacturing, while prime customers can borrow at 22 percent.

Citi Bank offers similar maximum interest rates of 28 percent for the same sectors, with a 21.50 percent rate for prime borrowers.

Coronation Merchant Bank presents one of the highest rates, with loans available at 30 percent for both prime and maximum customers, though it offers a lower rate of 9 percent to prime customers in mining, quarrying, and manufacturing.

Ecobank has adjusted its maximum lending rate to 30 percent, while its prime rate is 26.75 percent.

The highest lending rates are observed at Stanbic IBTC Bank, where maximum rates reach up to 50 percent, though prime rates vary between 8 percent and 27 percent.

Meanwhile, FCMB offers loans at a maximum rate of 40 percent and a prime rate of 22.50 percent, reflecting the wide range of adjustments made by different financial institutions.

FBN Quest Merchant Bank and Unity Bank provide more moderate rates for specific sectors. FBN Quest offers a 9 percent rate to prime customers in agriculture and forestry, with a maximum rate of 30 percent in the manufacturing sector.

Unity Bank, on the other hand, has lending rates ranging from 9 percent to 30 percent, with a maximum rate of 38 percent.

The adjustments in lending rates are not limited to these institutions. Fidelity Bank, for example, now offers loans at 27 percent for its prime customers, with a maximum rate of 30 percent, while First Bank of Nigeria has set its lending rate at 25 percent for prime customers, and 32 percent at the maximum.

However, prime customers in the manufacturing sector can secure loans at a lower rate of 15 percent.

These rate changes reflect the broader strategy of Nigerian banks to align with the CBN’s monetary policy, ensuring they manage their lending portfolios effectively amid economic fluctuations.

The adjustment in lending rates is expected to have widespread implications for borrowers across various sectors, influencing borrowing costs and potentially impacting economic activities.

As the financial services sector adapts to the new MPR, stakeholders and analysts will closely monitor the effects of these changes on the economy.