Nigeria remains exposed to high borrowing costs as interest-service burdens across emerging markets rise to their highest level in two decades, according to an Oxford Economics assessment reported on July 30.
The research said interest service costs across emerging economies reached 11.1 percent of government revenue in 2025. Countries with large debt burdens, political risks and weak external positions remain particularly vulnerable even where broader sovereign-risk indicators have improved.
Nigeria’s policy rate remains elevated
The Central Bank of Nigeria retained its Monetary Policy Rate at 26.5 percent at its July 20 and 21, 2026 meeting. The bank is seeking to contain inflation and support financial stability, but a high benchmark rate also keeps credit expensive for businesses and households.
Commercial borrowing costs are influenced by more than the policy rate, including bank risk assessments, liquidity conditions and inflation expectations. Still, an elevated MPR tends to reinforce expensive loans across the economy.
Why businesses and government are affected
High rates can discourage investment, limit business expansion and raise the cost of financing inventory, machinery and housing. Small and medium-sized businesses are especially vulnerable because they often lack access to cheaper international or development finance.
For government, rising debt-service costs reduce the money available for infrastructure, education, health and social protection. The central policy challenge is to bring inflation down without weakening productive activity more than necessary.
Improving revenue collection, reducing waste, stabilising the currency and directing credit toward productive sectors could help lower vulnerability. Clear debt reporting and disciplined borrowing are also essential because high interest costs magnify the consequences of weak public investment decisions.
Sources: Central Bank of Nigeria monetary policy decisions and The Guardian, July 30, 2026.