With the CBN’s benchmark rate at 26.5%, ordinary bank loans can quietly destroy a thin-margin business. The good news: for most small businesses, the commercial bank is the wrong place to look first.
Every few weeks, the Central Bank of Nigeria’s Monetary Policy Committee meets and sets the Monetary Policy Rate — the benchmark that influences what every bank charges to lend. As of May 2026, that rate is 26.5%, after a small cut earlier in the year. Headline inflation was running at around 15.7% in April. For a small business owner, the abstract percentages translate into a very concrete reality: borrowing from a commercial bank is expensive.
What a high rate does to a small business
When the benchmark is this high, and banks are also required to keep a large share of deposits in reserve, the cost of an ordinary loan or overdraft can easily outrun the profit margin of a typical small business. A trader making a 20% margin who borrows at close to 30% is, in effect, working for the bank. This is the trap: borrowing to fund day-to-day operations at commercial rates can quietly turn a profitable business into a struggling one.
A trader on a 20% margin who borrows at close to 30% is, in effect, working for the bank.
Where to look instead
The practical takeaway for 2026 is to look past the commercial bank first. Concessionary and development finance — from the Bank of Industry and various development funds — often comes at single-digit interest, a world away from commercial rates. Grants, where you qualify, are cheaper still: they do not have to be repaid at all. Before you sign for an expensive loan, it is almost always worth checking which concessionary options and grants you are eligible for.
Before you borrow at all
Often the cheapest money is the cash already owed to you. Chasing down unpaid invoices and tightening your cashflow can remove the need to borrow in the first place. And whenever you do consider a loan, calculate its true cost against your real margin — not the headline rate, but what it actually does to your bottom line. The direction of policy is cautiously toward easier money, but the CBN has signalled it remains vigilant, so do not bank on cheap credit arriving soon.
| ✓ YOUR ACTION CHECKLIST |
| ❑ Before any commercial loan, check single-digit options: Bank of Industry, development funds, grants. |
| ❑ Calculate a loan’s true cost against your real margin — high rates can erase thin profits. |
| ❑ Prioritise collecting receivables and tightening cashflow over borrowing to fund operations. |
| ❑ Use a grant and funding finder to surface concessionary options you actually qualify for. |
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