•Says Nigeria 6th most expensive nation to source credit
By Merit Ibe
The Manufacturers Association of Nigeria (MAN) has expressed worries over the continued decision of the Central Bank of Nigeria (CBN) to maintain the Monetary Policy Rate (MPR) at 27.5 percent since November 2024, saying a nation cannot industrialise on the back of prohibitively expensive credit.
The association explained that with the benchmark interest rate held at 27.5 percent, Nigeria has become the 6th most expensive country to source credit as local manufacturers grapple with an average lending rate of over 37 percent, despite a global wave of interest rate reductions aimed at revitalizing economic productivity and combating stagflation.
The Central Bank of Nigeria (CBN) retained the MPR at 27.5% in May.
Commenting, Director General of MAN, Segun Ajayi-Kadir noted that the policy posture is not only inflationary, but suffocating the capacity of the manufacturing sector.
Ajayi-Kadir, therefore, urged the authorities to cut the benchmark interest rate significantly to reflect current realities and ease the credit burden on manufacturers.
“The current monetary policy is not only undermining manufacturers’ confidence but also jeopardizing national economic resilience.
“We urge the Central Bank to act decisively and in synergy with the fiscal authority to ensure that Nigeria’s manufacturing sector does not sink deeper into stagnation. The time to act is now.”
He decried that the policy compounded other limiting factors of its members, that were small, medium and large-scale operators, making it increasingly difficult for them to stay afloat, expand production lines, or even meet basic operational costs.
The DG lamented that when most progressive economies are charting a course toward industrial recovery and macroeconomic stability, Nigeria’s monetary stance tends to lead the economy in a different direction.
“Over the last quarter, countries such as members of the Euro Area, the United Kingdom, Denmark, Australia, China, India, Thailand and Egypt, have implemented interest rate cuts to bolster economic growth and support productive sectors. Yet, our rigidity continues to create unintended consequences that may deepen the parlous performance of the productive sector.”
He noted that when credit is priced highly, production declines and the nation imports poverty.
“Our concerns go beyond the debilitating impact on our members’ business. The “Nigeria First Policy”, which seeks to strengthen local industry and reduce import dependence, may be under severe threat.
“At the heart of its successful implementation lies access to affordable financing to boost capacity utilization. Unfortunately, the current interest rate regime constrains finance costs for our members, surging by over 44 percent from N1.43 trillion in 2023 to N2.06 trillion in 2024 and rising. This represents a sharp increase that has directly depressed productivity and led to underutilization of industrial capacity.”
He lamented that the high cost of credit has not only diminished the flow of investments into the manufacturing sector but has also dulled the return on existing investments, with small and medium industries hit the hardest.
The LCCI viewed that the current MPR level remains prohibitively high for private sector development, noting that MSMEs, the engine of job creation and productivity in Nigeria, are being squeezed by the high cost of credit.
The chamber recommended that the CBN adopt a cautious stance while also providing a clear signal of possible future easing, subject to sustained economic improvements. To cushion the real sector while maintaining price discipline,the chamber advised that the fiscal authorities remain consistent with the reforms that support price stability through increased production in the real economy.
“Without affordable financing, their capacity to grow, compete, and contribute to economic development is severely limited.
Moreover, it is increasingly clear that monetary policy alone cannot curb inflation that stems from structural and supply-side inefficiencies.”
The chamber also emphasised the need to reinforce development finance initiatives by offering concessional rates to high-impact sectors such as manufacturing, agriculture, renewable energy, and power supply, adding that development finance institutions like the Development Bank of Nigeria, Bank of Agriculture, NEXIM Bank, and the Bank of Industry need better funding and directions towards supporting the productive and industrial sectors of the economy.
“Promote transparency in bank lending rates to ensure borrowers are not unfairly burdened by excessive spreads above the MPR.
“Implement measures to stabilize the FX market, reduce arbitrage opportunities, and rebuild investor confidence, critical steps for reducing imported inflation.
Almona pointed out that the path forward must balance inflation containment with the urgent need to revitalize Nigeria’s productive economy.
“Now is the time for careful, data-informed monetary signalling coupled with strategic support for the real sector. We urge the Central Bank of Nigeria and the Federal Government to incorporate these perspectives into their policy decisions to foster sustainable growth and economic resilience.”