Why Your Bank Loan Still Costs So Much, Even After the CBN Rate Cut

The CBN cut its benchmark rate from 26.5% to 23% in September. Many borrowers expected cheaper loans almost at once. Then the September lending figures came out, and they went the other way. If you are wondering why your bank is still quoting a high rate, this post explains it.

Explain it like I’m 5

Think of the pepper seller in the market. She buys at a wholesale price, then sells to you at a higher retail price. If the wholesale price drops a little, she may not drop your price at all. The CBN rate is the wholesale price of money. Your bank sets the retail price, and it adds its own costs and its own risk on top.

What the CBN rate is, and what it is not

The Monetary Policy Rate (MPR) is the CBN’s benchmark. At its meeting of 21 and 22 September 2026, the CBN reset the MPR at 23%. But banks do not lend to ordinary customers at the MPR. It is a guide, not the price on your loan offer.

Two numbers that matter

• Prime lending rate: roughly what banks charge their best, lowest-risk customers.
• Maximum lending rate: the highest rate a bank charges, which is closer to what riskier borrowers can face.

Figures from the CBN’s money market indicators, reported by ThisDay on 26 October, show that in September 2026 the average prime lending rate rose to 19.04% from 17.86% in August. The average maximum lending rate rose to 32.62% from 29.20%. So lending rates went up in the same month the MPR came down.

Why did rates not fall?

The report gives several views, from analysts and the IMF:

• Tight credit supply. One analyst said the rise showed there was tight money supply in the credit market in September despite the cut in the MPR.
• Banks price by risk, not by the MPR. Another analyst said only prime borrowers get a rate close to the MPR.
• Cuts pass through slowly. The IMF, cited in the report, found that banks pass on rate rises quickly but are slower to pass on cuts.

The CBN also kept the cash reserve requirement for deposit money banks at 45% at that meeting, which affects how much banks have available to lend. The report adds that analysts expect average lending rates to rise further even as inflation eases, so treat any quick fall in loan rates as a possibility, not a promise.

What this means for you

• Personal loans and overdrafts: your rate depends on your income, your history with the bank and your risk, more than on the CBN.
• Business loans: SMEs often sit nearer the maximum end, so a policy cut may not change your offer for a while.
• Savings: if rates do fall over time, what you earn on savings and Treasury bills may also fall.

What you can do

1. Compare the total repayment, not just the monthly instalment, across at least two or three banks.
2. Ask for the full cost, including management fees, insurance and any other charges.
3. Negotiate. A salary account, a good repayment history, or a guarantor can help you get a better rate.
4. Check whether the rate is fixed or variable, and when it can change.
5. Borrow less, or for a shorter period, if the interest cost is high.
6. Be careful with quick loan apps. Read our guide to the red flags before you borrow from any app.

For what the September cut means for savings and Treasury bills, read our CBN rate cut explainer.

Follow Banking Decoded on NairaDecoded.com for plain-English explanations of rates, loans and savings.

FAQ

Why are bank loan rates high when the CBN cut its rate?

Banks price loans by their own costs and by the risk of the borrower. The CBN rate is a guide, and cuts can take time to reach customers. In September 2026 the average maximum lending rate actually rose.

What is the difference between prime and maximum lending rate?

Prime is roughly the rate for the best customers. Maximum is the highest a bank charges. Most ordinary borrowers are priced somewhere between them or near the top.

Will my loan rate come down?

If your loan has a variable rate, it may eventually change, but banks decide when and by how much. Ask your bank in writing how and when your rate can be reviewed.

Sources

• Despite Cut in MPR, Average Maximum Lending Rate Rises to 32.62% — ThisDay (26 October 2026)
• Monetary Policy Decisions (307th MPC meeting) — Central Bank of Nigeria

This article explains published data and is not financial advice. Lending rates change monthly, so check the latest CBN data and your bank’s offer. See our Disclaimer.