Nigeria
Loan Interest Rates in Nigeria Explained: Monthly, Flat and Annual Rates
A 5% monthly rate is not 5% a year, and a flat rate is not the same as a reducing one.
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- Monthly to annual
- 5% monthly is about 60% a year simple
- Flat vs reducing
- Flat costs roughly double
- Typical app rates
- 5%-15% monthly
- Legal context
- CBN guidance on disclosure
Monthly rates compound fast
5% a month is about 80% a year once compounded. On 100,000 naira that is 80,000 of interest, not 60,000.
Flat rate is the expensive one
A flat 5% monthly on 100,000 over 12 months charges 5% of the original sum every month, even as the balance falls. The effective rate is close to double.
Ask for the reducing-balance rate
Reducing balance charges interest on the outstanding amount only. Insist on it, or ask for the total repayable and compare.
Short tenors hide the cost
A 14-day loan at 15% is a 390% annualised rate. Fine for a salary bridge, ruinous for anything longer.
VerdictConvert everything to an annualised reducing-balance figure before comparing. Flat monthly rates flatter the lender.
FAQ
Is 5% monthly expensive?▾
It annualises to roughly 80%.
What is a flat rate?▾
Interest on the original sum for every month, regardless of balance.
Which is cheaper?▾
Reducing balance, by roughly half.
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