IMF Slams Nigerian Banks for Rapid Rate Hikes and Slow Cuts

The IMF warns that Nigerian banks act like rockets when raising lending rates but move like feathers when cutting them. At its June meeting, the CBN kept the benchmark rate at 26.5% and maintained high cash reserve ratios for deposit-taking institutions. The IMF notes a 100bps MPR hike drives lending rates up by about 175–180bps on impact, while a similar cut only lowers them by 25–30bps. Savings rates have lingered around 3–7%, reflecting limited deposit competition and captive savers. The report also highlights that the June 2023 FX unification has improved transmission, though significant distortions persist. To strengthen monetary policy, the IMF urges a review of Nigeria’s high reserve requirements and cautions against monetising fiscal deficits through central bank lending, which can fuel inflation and naira depreciation.

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