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CBN’s 23% Interest Rate Cut: What Nigerian Banks Are Changing in Lending Rates and Savings Rates for Borrowers and Savers
Two weeks after the Central Bank of Nigeria cut its benchmark rate by 350 basis points to 23 percent, banks have started to respond, but not in the way most borrowers hoped. Savings rates are already coming down at some lenders. Loan rates, by most accounts, are not. That uneven response is the main story for ordinary customers, and it will shape what households and small businesses pay and earn over the coming months.
The Central Bank of Nigeria announced the cut on September 22, lowering the Monetary Policy Rate from 26.5 percent to 23 percent, the largest reduction in almost two decades. The committee also narrowed the corridor around the rate to +50/-300 basis points. That moved the Standing Lending Facility rate, which is what banks pay to borrow overnight from the CBN, down to 23.5 percent from 27 percent. The Standing Deposit Facility rate, which is what banks earn on cash left with the CBN overnight, fell to 20 percent from 22 percent. The cash reserve requirement stayed at 45 percent for commercial banks, 16 percent for merchant banks and 75 percent for non-TSA public sector deposits.
The central bank was careful to say that this was not a standard loosening. It described the move as an operational recalibration, meant to bring the policy rate back in line with where banks were actually lending to each other. That distinction matters for borrowers. A recalibration changes the reference points banks work from, but it does not tell lenders to lower what they charge businesses and individuals.
The first visible reaction has come on the savings side. Ecobank Nigeria has cut rates on four naira savings products, citing the policy rate decision. Its All Savings Account now pays 6.90 percent a year, down from 7.95 percent. The arithmetic is not a coincidence. The minimum savings rate banks must pay is tied to 30 percent of the policy rate, and 30 percent of 26.5 is 7.95, while 30 percent of 23 is 6.90. Other lenders that pay the minimum are expected to follow the same path as they update their rate cards. Customers should check their bank’s latest published rates or ask directly, because changes are often announced through notices rather than individual messages. You can find the bank’s current offer on the Ecobank Nigeria website, and other lenders post similar notices on their own sites.
For savers, the practical effect is a small drop in earnings on a balance that was already losing ground. Inflation was 15.39 percent in August, so a 6.90 percent savings rate leaves the real return negative by about eight and a half percentage points. A customer with N1 million in a savings account at the new minimum would earn about N69,000 over a year, compared with about N79,500 at the old rate. The gap is modest in naira terms, but it widens with larger balances.
Borrowers are in a different position. Nigerian banks had not lowered loan rates by the end of the first week after the decision, and a senior official at one large lender said there were no immediate plans to do so. The Manufacturers Association of Nigeria has warned that prime lending rates could stay near 27 to 30 percent even after the cut, which would keep the cost of credit well above the new policy rate. Rates for riskier borrowers can be much higher. Central bank data cited in market reports shows the average maximum lending rate eased to about 29.19 percent in August from 33.16 percent in July, so some cooling was under way before the policy rate moved.
Why would loan rates lag? Banks price loans on more than the policy rate. Their own funding costs, the risk of default, operating expenses and the return they can earn elsewhere all feed in. Government securities are a major competitor for their cash. The 182-day OMO bill cleared at 16.92 percent on October 6, and the one-year Treasury bill’s true yield is close to 18.8 percent. A bank that can earn that without lending has little reason to cut loan prices quickly, especially when reserve requirements already tie up a large share of deposits. The central bank has also started publishing lending rates across deposit money banks, which should make it easier for businesses to compare offers and put pressure on the highest-priced lenders.
Economists and industry groups expect lending rates on both new and existing loans to adjust gradually, though the extent will vary by customer. A well-established company with a good repayment record is more likely to see a cut than a small business with limited collateral. How much a borrower benefits will also depend on whether the loan is on a fixed or variable rate. Variable-rate facilities are the ones most likely to be repriced, and the loan agreement will say whether the bank can adjust the rate and how much notice it must give.
What should customers do now? Borrowers with existing variable-rate loans can write to their bank, ask whether the rate will be reviewed in light of the policy change and request the answer in writing. Anyone planning to take a new loan should compare quotes from several lenders, since the gap between banks can be wide, and should ask about fees as well as the headline rate. Those with a strong credit history have the most room to negotiate.
Savers have more choices than the default account. Fixed deposits, money market funds and government securities generally pay more than a regular savings account, though each comes with its own trade-offs. A fixed deposit locks money away for a set period. Money market funds can lose value if yields fall quickly, and Treasury bills need to be held to maturity to guarantee the return. Yields on short-term government paper are also drifting lower after the rate cut, so the best returns of the past year are narrowing. None of this is financial advice, and readers who are unsure should speak to a licensed adviser, but comparing the after-fee return on each option is a sensible first step.
The next signals will come from the banks themselves. Customers should watch for announcements of revised savings rates, any change in the prime lending rate and the lending rate tables the CBN is now publishing. The Monetary Policy Committee meets again on November 23 and 24, and inflation data due before then will show whether the central bank has room for further adjustments. Until banks pass more of the cut through to borrowers, the decision will have helped savers’ balance sheets less than it has helped the banks’ own funding costs. Further coverage of banking and the economy is available on Business Tech.
