By David Akinmola
Nigerian businesses are groaning under the weight of skyrocketing borrowing costs as interest rates surge to about 36%, the highest level in decades, leaving many firms struggling to service loans.
The sharp rise follows a series of monetary policy tightening measures by the Central Bank of Nigeria (CBN) aimed at curbing inflation and stabilising the naira. But while policymakers defend the move as necessary to rein in rising prices, its impact is squeezing companies across manufacturing, trade, and services.
Business owners say monthly repayments have become unsustainable, forcing some to scale back operations, freeze hiring, or shelve expansion plans. Small and medium-sized enterprises (SMEs), which rely heavily on bank credit to fund working capital, appear the hardest hit.
“Our repayment costs have doubled within a year,” said the owner of a mid-sized packaging company in Lagos. “We are now spending almost as much on servicing loans as on raw materials. If nothing changes, survival will be difficult.”
Bankers confirm that more corporate clients are requesting loan restructuring, while others are defaulting outright. The Nigerian Association of Small and Medium Enterprises (NASME) has warned that without targeted support, thousands of jobs could be at risk as companies struggle to cope.
Financial analysts note that while high rates have slightly eased inflationary pressure, the trade-off is reduced private sector investment and weakening consumer demand. “The policy is a double-edged sword,” said Dr. Chuka Nwosu, an economist. “It may stabilise the macroeconomy in the short term, but it risks strangling growth if sustained at this pace.”
With credit now more expensive than ever, commercial banks are turning their attention to government securities, which offer safer, high-yield alternatives to lending, further reducing access to funds for businesses.
Industry stakeholders are calling on the federal government to introduce relief measures such as concessional lending schemes for productive sectors to cushion the private sector from the impact of record-high interest rates.
