High lending rates crippling production, MAN tells CBN

The Manufacturers Association of Nigeria has urged the Central Bank of Nigeria to further reduce interest rates to ease the rising cost of borrowing, which continues to stifle production and erode competitiveness in the manufacturing sector.

In its reaction to the outcome of the Monetary Policy Committee meeting held on November 24 and 25, MAN stated on Wednesday that it acknowledged the MPC’s decision to retain the Monetary Policy Rate at 27 per cent but stressed that the current lending environment remains “punitive for manufacturers.”

Following its 303rd meeting on November 25, the MPC maintained the benchmark rate at 27 per cent, adjusted the Standing Facilities Corridor to +50/-450 basis points, retained the Cash Reserve Ratio at 45 per cent for commercial banks and 16 per cent for merchant banks, and kept the liquidity ratio at 30 per cent.

The MPC also expressed satisfaction with improving macroeconomic indicators, noting what they called a “continued slowdown in inflation” and the “accelerated pace of disinflation,” which stood at 16.05 per cent in October.

But MAN cautioned that the prevailing conditions in the real sector demand more decisive easing. In his statement, Director-General of MAN, Segun Ajayi-Kadir, said the association “appreciates the decision of the MPC to halt the increase in MPR” but insisted that manufacturers had expected “a further reduction in the rate to reduce the cost of borrowing.”

Ajayi-Kadir noted that despite the improvement recorded at the last meeting, manufacturers still contend with borrowing costs “ranging between 30 and 37 per cent,” describing the rates as “high, restrictive, and damaging to competitiveness.”

He said, “The rate hinders production and reduces the competitiveness of the sector. While the emphasis on exchange rate stability and improved forex liquidity is crucial, it is essential to reduce the cost of funds to encourage borrowing for expansion and investment.”

The Association warned that persistent high lending rates would continue to limit manufacturers’ access to affordable credit, particularly those in the small and medium industrial cadre.

MAN added that the challenge was compounded by structural bottlenecks such as poor infrastructure, high logistics costs, erratic electricity supply, soaring energy costs, and insecurity, which it said “cumulatively raise production costs and weaken competitiveness.”