By David Akinmola
Nigerian businesses are facing mounting difficulties in servicing bank loans as borrowing costs spike to historic highs, following the Central Bank of Nigeria’s (CBN) tightening measures that have pushed interest rates to about 36%.
The record-high rates, a result of aggressive monetary policy aimed at curbing inflation and stabilizing the naira, have left many firms—especially small and medium-sized enterprises (SMEs)—struggling to meet repayment obligations. Analysts warn that if sustained, the situation could trigger a rise in loan defaults, force companies to scale down operations, and worsen unemployment.
Industry operators say the sharp rise in rates has already eroded cash flows across key sectors such as manufacturing, real estate, and trade, where businesses depend heavily on bank credit to fund operations. According to bankers, corporate clients are increasingly seeking loan restructuring options, while some are opting to delay expansion plans until lending conditions ease.
“The cost of credit is becoming unbearable,” said a senior executive at a mid-sized manufacturing company in Lagos. “Our monthly interest repayments now rival our wage bill, and we are being forced to review our staff strength and production targets.”
Financial experts note that Nigeria’s Monetary Policy Rate (MPR), currently at its highest level in over two decades, has translated into double-digit increases in lending rates. While the move has slowed inflation marginally, it has also squeezed the private sector, which accounts for more than 80% of the country’s employment.
The rising cost of credit has compounded the struggles of SMEs, which already grapple with high energy costs, currency volatility, and weak consumer demand. The Nigerian Association of Small and Medium Enterprises (NASME) has warned that unless relief measures are introduced, more businesses risk shutting down in the coming months.
Commercial banks, on their part, are tightening credit assessment processes to limit exposure to risky borrowers, further reducing access to funds for struggling companies. Some banks are also turning to government securities, which offer attractive yields with less risk compared to private-sector lending.
Economists argue that while high rates are a tool for stabilizing macroeconomic fundamentals, policymakers must strike a balance to avoid stifling productive sectors of the economy. “The trade-off between taming inflation and sustaining growth is delicate,” said Dr. Ifeoma Nwankwo, a financial economist. “The current credit environment is unsustainable for businesses, and without targeted interventions, we could see rising defaults and a contraction in private investment.”
As companies search for breathing space, industry groups are calling on the CBN and fiscal authorities to consider temporary credit support schemes or concessional lending windows to protect productive enterprises. Without such interventions, observers warn, Nigeria’s fragile economic recovery could stall.
