Nigeria's Maximum Lending Rate Drops Marginally to 34.78%

Nigeria's banking sector has seen a slight decrease in its average maximum lending rate, dropping to 34.78% in May 2026 from 35.17% in April. This marginal decline follows the Central Bank of Nigeria's (CBN) reduction of the Monetary Policy Rate (MPR) in February 2026. It is the first time the average maximum lending rate has fallen since the CBN's move.

The CBN had previously lowered the MPR to 26.50% from 27%, citing disinflation, naira appreciation, and an improved external position. However, data from the CBN's "Money Market Indicators" shows that the average maximum lending rate remained static at 35.17% between February and April, despite the interest rate cut.

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Interest rate transmission displays a clear “rockets-and-feathers” pattern, with borrowing rates adjusting upward rapidly during tightening cycles but declining only gradually when policy is eased.

This pattern has drawn criticism from the International Monetary Fund (IMF), which observed that Nigerian banks exhibit a "rockets-and-feathers" behavior. The IMF noted that lending rates increase rapidly when monetary policy tightens but are much slower to decrease when policy is eased. The report highlighted that while wholesale and lending rates respond strongly to MPR hikes, they adjust only gradually during easing cycles, causing concern for businesses already facing economic hardships.

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This asymmetry – statistically significant – implies that banks transmit tightening rapidly and even amplify it but adjust much more slowly during easing cycles.