See what Nigerian banks charge you for borrowing

Nigerian banks are charging an average interest rate of between 4 percent and 36 percent on loans given to customers in various sectors of the economy, especially agriculture and forestry, manufacturing and education.

This represents -7.5 percentage point lower and 24.50 basis point higher than 11.50 percent Monetary Policy Rate (MPR).

Apart from that there are other administrative charges, which sometimes are not known to customers.

A Lagos businessman, Christian Ezegolo, two years ago, took some loan from one of the banks at 23 percent interest rate and had liquidated the loan, but has not been able to access another loan since that time due to gamut of economic realities around the business environment.

Such challenges include the cost send time it takes to place order, produce, ship and clear the goods. Other considerations include the viability of the product as well as profitability.

A breakdown of the deposit money banks’ (DMBs) lending rates as published by the Central Bank of Nigeria (CBN) shows two different classes of loan pricing, which are prime lending rates, charged credit worthy customers and maximum lending rates, charged perceived risky customers.

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Consequently, banks charge customers lower interest rates of between 4 percent and 27 percent in the prime lending rate category.

Applicable rates for each of the DMBs as of April 9, 2021, showed that Stanbic IBTC Bank charged the lowest rate on loans at 4 percent, followed by GTBank, Polaris Bank, and Unity Bank at 5 percent each, Fidelity Bank 6 percent, Rand Merchant Bank 6.08 percent, FBN Merchant Bank and UBA 7 percent each, Coronation Merchant Bank 8 percen, and Wema Bank 9 percent, among others.

The banks that charge higher in the prime lending category include Heritage Bank 27 percent, Wema Bank 25 percent, Ecobank 23 percent, First Bank of Nigeria 22 percent, Keystone Bank 21 percent, and UBA 20 percent.

Banks total credit to the private sector rose by 2.56 percent to N20.37 trillion in the fourth quarter (Q4) of 2020, according to the National Bureau of Statistics (NBS).

The NBS banking sector report showed that total value of credit allocated by the bank stood at N20.37 trillion as of Q4 2020. Oil & Gas and Manufacturing sectors got credit allocation of N3.93 trillion and N3.19 trillion to record the highest credit allocation as of the period under review.

The manufacturing sector accounted for 15.7 percent of the total. The sector has benefitted from increased credit extension by the banking industry.

Loans extended to the agriculture sector accounted for 5 percent of the total in Q4; it grew by 12.5 percent q/q and 36 percent y/y.

“We expected 2020 to be a challenging year for Nigerian banks due to changes in the operating environment. Some challenges banks had faced were: increased regulatory oversight, low market interest rates, reinvestment risk as investment portfolios mature, and downward pressure on non-interest income arising from regulatory-induced fee cuts on a few bank charges, including electronic banking transactions,” analysts at FBNQuest say.

Godwin Emefiele, governor of the CBN, at the last Monetary Policy Committee (MPC) meeting, attributed the robust growth in credit to private sector to some of the administrative actions around the cash reserve requirement (CRR) as well as the loan-to-deposit ratio (LDR) policy.

The CBN in October 2019 raised the Loan to Deposit Ratio of banks to 65 percent, after the September 30, 2019 deadline given to the banks to meet its 60 percent directive. However, the regulator extended the deadline of the 65 percent LDR to March 31, 2020.

Aisha Ahmad, CBN deputy governor, said maintaining the positive trajectory of credit growth, especially in critical sectors (manufacturing, retail & SMEs) would be instrumental to accelerating output growth in the short to medium term.

In the maximum lending category, banks charge between 9.00 percent and 36 percent. For instance, Suntrust Bank charges as low as 9.00 percent, followed by Globus Bank 14 percent and Coronation 17 percent.

Fidelity Bank and Union Bank charge as high as 36 percent per annum, followed by Heritage Bank 35 percent, Keystone Bank 34 percent, and Sterling Bank 33 percent, among others.

To ensure transparency and full disclosure, the CBN makes public weekly, lending rates obtained in all DMBs to guide business decisions.