Businesses face costly credit as maximum lending rates reach 46%

By Babajide Komolafe

Businesses across key sectors of the   economy are grappling with prohibitive borrowing costs as maximum lending rates charged by banks rose   to as high as 46 per cent.

Vanguard analysis of banks’   deposit and lending rates published by the Central Bank of Nigeria (CBN)   show that while prime lending rates largely hovered between 25 and 32 per cent, maximum lending rates—typically applied to higher-risk borrowers and unsecured facilities—spiked sharply across several banks and sectors, underscoring tight liquidity conditions and elevated risk pricing in the banking system .

Checks by  Vanguard  indicate that the steep borrowing costs are most pronounced for small and medium-sized enterprises (SMEs) and firms operating in capital-intensive segments such as oil and gas, construction, manufacturing, power and energy, as well as transportation and storage. CBN data show that prime lending rates for these sectors generally ranged between 25 and 32 per cent, while maximum rates climbed to between 35 and 46 per cent, particularly for borrowers assessed as higher risk, reflecting elevated sectoral risk premiums and cautious bank lending behaviour .

Further analysis of the data reveals wide disparities in pricing across banks and sectors. In the oil and gas sector, maximum lending rates of up to 46 per cent were recorded by some lenders, including Ecobank, Polaris Bank and Globus Bank, and Access Bank.  

For construction and real estate, banks such as Sterling Bank, Unity Bank and Wema Bank posted maximum rates ranging between 35 and 40 per cent.

Similarly, firms in the manufacturing sector faced peak lending rates of up to 38 per cent from banks including Fidelity Bank, FCMB and Union Bank, while operators in power and energy as well as transportation and storage contended with maximum rates of between 36 and 39 per cent, charged by lenders such as Access Bank, Zenith Bank and United Bank for Africa (UBA), especially on long-tenor or unsecured facilities .

Meanwhile, interest rates on deposits   remained relatively subdued. Average savings deposit rates were largely flat at about 8.1 per cent across most banks, while demand deposit rates generally stayed below 2 per cent, widening the spread between lending and deposit rates.

 Time deposit rates showed some improvement, rising to as high as 19 per cent in select banks, but still lagged the peak lending rates borne by businesses .

The post Businesses face costly credit as maximum lending rates reach 46% appeared first on Vanguard News.