Nigeria’s digital lenders stay cautious as CBN cuts benchmark rate

Digital lenders in Nigeria may begin cautiously lowering borrowing costs after the Central Bank of Nigeria (CBN) cut the Monetary Policy Rate (MPR) to 26.5% from 27% on Tuesday, signalling a potential easing of the country’s prolonged high-interest-rate environment.

The rate cut, the first since September 2025, follows signs of moderating inflation. According to Yemi Cardoso, CBN governor, this decision followed the sustained drop in inflation, which has fallen for 11 consecutive months. Headline inflation stood at 15.10% in January.

The MPR is the benchmark interest rate set by the CBN to control inflation, manage money supply, and influence borrowing costs in the economy.

A lower benchmark rate could ease funding costs for digital lenders that rely heavily on borrowed capital rather than customer deposits, potentially reshaping loan pricing, borrower access, and risk appetite.

“Digital lenders and members of the Money Lenders Association usually borrow at interest rates linked to MPR, so any change in such MPR will have a significant impact on our cost of lending to customers,” Gbemi Adelekan, president of the Money Lenders Association, an industry group for registered digital money lenders, told TechCabal in an interview on Wednesday.

Unlike commercial banks, which rely heavily on low-cost customer deposits, most digital lenders depend on wholesale funding, private capital, or institutional borrowing, making them more sensitive to benchmark rate movements.

Higher MPR levels over the past year have forced many lenders to either raise borrowing costs for customers or absorb thinner margins amid growing competition.

Currently, commercial banks’ interest rates exceed  30% annually in many cases. Loan apps are currently charging between five and 15% monthly, according to Adelekan.

Rate cuts may take time to reach borrowers

Industry experts do not expect the rate cuts to provide immediate relief.

“Everyone benchmarks around MPR and their cost of borrowing,” said Babatunde Akin-Moses, co-founder of Sycamore, a digital lending app. “Rates should come down as the cost of funds becomes cheaper, but it may not happen immediately since some loans are already in effect, and may not have agreed variable rates with customers.”

Existing loan books and previously negotiated funding arrangements mean lenders may adjust pricing only gradually.

Adeshina Adewumi, CEO of Trade Lenda, a digital bank for small businesses, also expects only modest changes.

“I do not envisage any significant impact,” he said.  “However, a lower MPR means lower cost of funds to digital lenders, and we can afford to relax our numbers slightly.”

Adelekan expects loan app interest rates to remain largely within the current range for now.

Digital lenders adapting

Nigeria’s digital lending market has expanded rapidly as households turn to short-term credit to cope with rising living costs and limited access to traditional bank loans. As of February 24, 2026, the Federal Competition and Consumer Protection Commission (FCCPC) had authorised 469 digital lenders operating across the country.

Consumer credit stood at ₦3.11 trillion ($2.31 billion) in the third quarter of 2025, according to the CBN, with personal loans accounting for more than two-thirds of lending activity.

However, the high-interest-rate environment has forced digital lenders to adapt.

According to Adelekan, many companies are moving away from small nano loans, typically under ₦10,000, that powered the early growth of Nigeria’s loan app ecosystem.

“High MPR rates led to a tightening of credit by our members,” he said. “Lately, most of our digital lenders are shifting away from high-risk, small-ticket nano loans (under  ₦10,000) toward quality and customers with verifiable income to reduce our non-performing loans. ”

This shift reflects a broader industry recalibration as lenders prioritise portfolio quality over rapid user acquisition.