The cost of borrowing in Nigeria remains an important consideration for households and businesses even as banks report improved access to credit, with the Central Bank of Nigeria’s second-quarter 2026 Credit Conditions Survey showing that lending-rate spreads moved differently across various categories of borrowers.
The survey showed that while lenders increased the availability of secured, unsecured and corporate credit in the second quarter, the cost of credit did not move in the same direction for all borrowers. Lending-rate spreads narrowed for some categories but widened for others, highlighting the different borrowing conditions faced by households, small businesses and larger companies.
The findings provide a useful picture of how the cost of bank credit is evolving at a time when demand for some forms of borrowing is also increasing.
What is the cost of borrowing?
The cost of borrowing refers to what a borrower pays to obtain credit from a bank. While the interest rate charged on a loan is the most obvious component, the CBN Credit Conditions Survey looks at lending-rate spreads relative to the Monetary Policy Rate (MPR).
A lending-rate spread essentially shows how lending rates are moving relative to the benchmark policy rate. Therefore, when a spread narrows, it indicates that the difference between the lending rate and the MPR has reduced, while a widening spread indicates that the difference has increased.
The Q2 2026 survey shows that these movements differed significantly according to the type of borrower and loan.
Unsecured borrowing became relatively less expensive for households
For households taking unsecured loans, the survey showed that the lending-rate spread narrowed to 7.8 index points in the second quarter.
Unsecured lending generally includes forms of borrowing that are not backed by specific collateral. The survey separately tracks demand for credit cards and overdraft or personal loans.
The narrowing of the spread indicates an improvement in the relative pricing of unsecured household credit during the quarter.
However, this should not be interpreted to mean that unsecured loans became cheap in absolute terms. Rather, the survey indicates that the spread relative to the MPR narrowed.
This distinction is important because a narrowing spread does not necessarily mean that borrowers are paying low interest rates. It means the gap between the lending rate and the policy benchmark has become smaller.
Secured lending moved differently
The picture was different for secured household lending.
The survey showed that the overall spread on secured lending to households widened to -4.5 index points in Q2 2026.
Secured lending is backed by an asset or other form of security, and the CBN survey separately considers lending for purposes such as house purchases, mortgages and consumer loans.
The widening in the spread therefore shows that the pricing movement for secured lending did not follow the same direction as unsecured household credit.
This is particularly relevant because demand for secured lending increased during the quarter.
Demand for secured credit rose to 15.1 index points, while demand for house-purchase lending and mortgage or re-mortgage lending also increased.
This means that more households were seeking secured financing at a time when the lending-rate spread on this category had widened.
Businesses faced different borrowing costs
The survey also shows a clear difference between small businesses and larger corporate borrowers.
For corporate lending, the spread narrowed for other financial corporations, medium private non-financial corporations and large private non-financial corporations.
The spreads stood at 14.0 index points for other financial corporations, 5.0 points for medium private non-financial corporations and 4.7 points for large private non-financial corporations.
For small businesses, however, the direction was different.
The spread on lending to small businesses widened to -3.8 index points.
This is one of the most important findings of the survey because it shows that improved access to credit does not necessarily translate into similar borrowing costs for every business.
Small businesses may have greater access to bank financing, but their lending-rate conditions moved differently from those of medium and large private non-financial corporations.
Why does this matter to small businesses?
The distinction between access and cost is important for businesses deciding whether to borrow.
The survey found that demand for corporate credit increased to 15.2 index points in Q2 2026. Demand from small businesses rose by 26.5 index points, while demand from medium private non-financial corporations increased by 25.5 points and demand from large private non-financial corporations rose by 8.9 points.
Lenders identified balance-sheet restructuring, capital investment and inventory financing as important factors behind corporate borrowing demand.
This means businesses were seeking credit for purposes that could support their operations and investment.
But the cost of that financing remains significant.
For a small business, a loan used to finance inventory, restructure its balance sheet or invest in the business must generate enough income to cover the cost of borrowing. Therefore, the availability of credit alone does not determine whether borrowing is beneficial.
The movement in lending-rate spreads becomes important because it affects the overall financing conditions faced by businesses.
Why are borrowing costs different across borrowers?
The survey points to several factors influencing credit conditions.
For secured lending, lenders attributed changes in credit availability to factors including changes in the economic outlook, market-share objectives and changing liquidity conditions.
For unsecured lending, changes in the cost and availability of funds and market-share objectives were among the factors influencing credit availability.
For corporate lending, lenders pointed to tight wholesale funding conditions, the changing economic outlook and changes in sector-specific risks.
These factors help explain why lending conditions can differ across borrowers.
Banks do not price every loan in exactly the same way. The conditions attached to credit can vary according to the type of loan, the borrower and the risks associated with the lending category.
The CBN survey therefore shows a credit market where the direction of lending costs is not uniform.
More loans are being approved
Despite the differences in lending-rate spreads, banks reported an increase in the proportion of loan applications approved during the quarter.
The survey showed that approval rates increased across secured, unsecured and corporate lending compared with the previous quarter.
This suggests that borrowers were not only demanding more credit in some categories but that a greater proportion of applications were being approved.
However, approval of a loan and affordability of the loan are two different issues.
A borrower may qualify for a loan and obtain the financing needed, but the interest cost and other conditions attached to the facility will determine how burdensome the loan becomes.
This is particularly important for businesses borrowing to finance working capital or investment, where the return generated by the borrowed funds needs to justify the financing cost.
What households are borrowing for
The survey also provides clues about the changing demand for household credit.
Demand for consumer loans increased by 11.2 index points, while demand for house-purchase lending rose by 9.6 points.
Demand for mortgage and re-mortgage lending increased by 13.3 points, while demand for overdraft and personal loans rose by 7.9 points.
Credit-card demand, however, declined by 2.0 points.
The pattern suggests that households were seeking different forms of financing, with stronger demand for personal, consumer and housing-related loans but weaker demand for credit-card lending.
The cost of borrowing therefore matters differently depending on the type of credit being sought.
Lower defaults could support lending conditions
Another important part of the survey is the movement in loan defaults.
Lenders reported lower default rates across secured and unsecured household lending and across all corporate lending categories, including small businesses, medium private non-financial corporations, large private non-financial corporations and other financial corporations.
This improvement in loan performance occurred alongside increased credit availability and higher loan approval rates.
For lenders, the performance of existing loans is an important consideration in extending new credit. The survey therefore presents a picture of increased credit supply occurring alongside an improvement in reported borrower performance.
What the survey does not say
The survey does not say that borrowing has become cheap for Nigerians.
Rather, it provides information on how lenders reported changes in lending-rate spreads across different categories of credit.
This distinction matters because the survey is based on lenders’ responses. The CBN notes that the results represent the responses of participating lenders and do not necessarily reflect the CBN’s own views on credit conditions.
The survey should therefore be read as an indication of how lending conditions changed during the second quarter, rather than as a statement that all Nigerian borrowers faced the same interest rates or borrowing costs.
The bigger picture
The Q2 2026 Credit Conditions Survey presents a mixed picture of borrowing costs.
On one hand, credit availability increased across secured, unsecured and corporate lending, while a higher proportion of loan applications were approved. Demand for secured and corporate credit also increased.
On the other hand, lending-rate spreads did not move uniformly.
The spread on unsecured household lending narrowed to 7.8 index points, while the spread on secured household lending widened to -4.5 index points. For corporate borrowers, spreads narrowed for other financial corporations, medium-sized and large private non-financial corporations, while the spread for small businesses widened to -3.8 index points.
For borrowers, the implication is that greater access to credit should not be confused with cheaper credit.
The cost of a loan depends on the lending category and the conditions attached to it. The CBN survey shows that while the credit environment improved in several respects during the second quarter, the movement in borrowing costs remained uneven across households and businesses.
For households and businesses considering new loans, therefore, the key question is not simply whether banks are willing to lend. It is also how the cost of that credit compares with the purpose for which the money is being borrowed and whether the financing can generate sufficient value to justify the cost.
Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy.
This piece was originally published on BusinessDay
