At 32.68%, Average Maximum Lending Rate Hits Record 20 Years High

Kayode Tokede

Despite the gradual reduction of the Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN), the average maximum lending rate in the Nigerian banking sector  increased to 32.68 per cent in January 2026, the highest since 2006.

According to the CBN ‘Money Market Indicator’ data, the average maximum lending rate was at 29.32 per cent in December 2025 and 29.79 per cent in January 2025.

The 32.68 per cent high is on the back of reduction  of interest rate to 27 per cent from 27.50 per cent (currently 26.50 per cent) by the Monterey Policy Committee (MPC).

The maximum lending rate refers to the highest permissible interest rate that lenders can charge borrowers. It is often defined as the rate that is one percentage point above the benchmark prime lending rate, which is determined by the CBN. This rate is crucial for ensuring fair lending practices and protecting borrowers from excessive interest rates.

The average maximum lending rate moved from 29.79 per cent in January 2025 to 29.32 per cent in December 2025, at the time interest rate was hovering between 27.50 per cent and 27 per cent.     

With interest rate at 27.00 per cent, commercial banks typically add a margin of 300–500 basis points above the interest rate to cover credit risk, inflation, and operational costs.

In the move to tackle inflation and stabilise the naira at the foreign exchange market, the CBN since November 2024 retained interest rate at 27.50 per cent from 27.25 per cent

In December 2024, the maximum lending rate was 29.71 per cent, when the MPC voted to retain the MPR at 27.50 per cent

The steep increase in the interest rate has sparked concerns regarding the potential impact on the cost of credit for businesses already facing economic hardships due to foreign exchange unificiation and fuel subsidy removal by the Federal Government.

Early in 2024, CBN data showed a 27.07 per cent average maximum lending rate in January 2024 when MPR was at 18.75 per cent, while in March 2024, it closed at 29.38 per cent as MPR stood at 24.75 per cent in March 2024.

When the MPR increased from 26.75 per cent in August 2024 to 27.25 per cent, the average maximum lending rate also rose from 29.93 per cent to 30.21 per cent in September 2024.

The banking sector lending rate in Nigeria averaged 14.17 per cent from 1961 until 2024, reaching an all-time high of 37.80 per cent in September of 1993 and a record low of six per cent in April of 1975.

In 2020, the average maximum lending rate reached a peak of 30.73 per cent when the MPR rate stood at 13.5 per cent

According to CBN data, the average prime lending rate increased to 19.54 per cent in January 2026 from 18.02 per cent in December  2025.

The reported 19.54 per cent average prime lending rate is the highest so far since 2006. 

The prime lending rate indicates the possible rate offered to the most creditworthy customers by Nigerian banks.

Nigeria’s average prime lending rate reached an all-time high of 19.66 per cent in November 2009 and a record low of 11.13 per cent in March 2021.

The steady increase in interest rate reflected in the average prime lending rate last year as the CBN intensified its effort to tackle inflation rate and stabilize the local currency at the foreign exchange market.

However, analysts have predicted a further increase in the average maximum lending and primer lending rate despite a stable foreign exchange market and ease in inflation figure.

This unprecedented move has not only set the interest rate at its highest level to date but also reflects the CBN’s determined effort to address the persistent pressure on foreign exchange and inflation.

Experts said commercial banks review their lending rates regularly, subject to their respective cost of funds and the direction of interest rate, not necessarily using interest rate as a distinct value.

The Vice President of Highcap Securities, Mr. David Adnori believe interest rate gives banks the direction of interest rates and the price they will pay if they have to borrow from or lend to CBN.

On his part, Investment Banker & Stockbroker, Mr.  Tajudeen Olayinka had stated that banks review their lending rates on a regular basis, subject to their respective cost of funds and the direction of MPR, not necessarily using MPR as a distinct value.

He said, “Therefore, their deposit mix, which includes idle customers’ deposits, determines what their weighted average cost of funds would be. They then factor in the signal from interest rate, to enable them arrive at their various prime lending rates which are usually reserved for their prime customers”