Nigeria’s average maximum lending rate eased to 33.16 per cent in June 2026, declining from 34.78 per cent in May, according to new Money Market Indicators data published by the Central Bank of Nigeria.
The modest decline follows the Monetary Policy Committee’s decision to hold the Monetary Policy Rate steady at 26.5 per cent, a position it has maintained since February. It represents the first meaningful movement in commercial borrowing costs since the easing cycle began. For Nigerian small businesses, however, the numbers on paper remain far removed from the conditions on the ground.
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The gap that will not close
The maximum lending rate stood at 29.51 per cent in June 2025, meaning that despite two MPR cuts since late 2025 and a sustained pause, borrowing costs for businesses are actually 3.65 percentage points higher than they were a year ago. The lending rate remained locked at 35.17 per cent from February through April 2026 without moving, only beginning to ease in May and June as the macroeconomic environment stabilised.
The International Monetary Fund has a name for this pattern. In its assessment of Nigeria’s monetary transmission mechanism, the Fund described it as a classic “rockets-and-feathers” phenomenon: borrowing costs rise swiftly during periods of monetary tightening — a 100-basis-point increase in the MPR pushes lending rates up by 175 to 180 basis points — but decline only gradually when policy is eased. A similar reduction in the benchmark rate lowers lending rates by just 25 to 30 basis points.
When the banking system transmits rate increases at seven times the speed it transmits rate cuts, the businesses absorbing elevated borrowing costs during a tightening cycle cannot expect equivalent relief when the cycle reverses. The asymmetry is structural and disproportionately harms the smallest borrowers.
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What this means for small businesses
For Nigerian SMEs navigating lending rates that still range between 20 per cent at the low end and 46 per cent at the high end depending on the institution and borrower profile, the June improvement offers limited practical relief. Credit to the private sector dropped from N93.7 trillion in January 2026 to N83.2 trillion by June — a contraction of 11.19 per cent year-to-date that reflects both the high cost of borrowing and businesses’ growing reluctance to take on debt at rates that erode rather than enable growth.
Muda Yusuf of the Centre for the Promotion of Private Enterprise has noted that the CBN’s rate decisions are currently serving a dual purpose: managing inflation and maintaining the attractive yields that sustain foreign portfolio investment inflows. That dual mandate creates a tension — the same rates that attract international capital are making domestic credit unaffordable for the small businesses that drive employment and economic activity.
A lending rate of 33 per cent is still 33 per cent. The direction of travel may be improving, but the destination — affordable credit for Nigerian SMEs — remains some distance away, and the pace at which the banking system is closing that gap is slower than the businesses waiting for relief can afford.
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The road ahead
Analysts and business groups are calling for CBN rate cuts at the next MPC meeting, with the improving inflation picture — headline inflation eased throughout the first half of 2026 — providing some room for further easing. Whether the committee acts, and whether any reduction translates into meaningfully cheaper credit for small businesses faster than previous cuts have, will be the test that matters most for Nigeria’s SME sector in the second half of the year.
