The Central Bank of Nigeria’s (CBN) aggressive monetary tightening has driven manufacturers to cut back on bank loans, marking the first quarterly decline in credit to the sector since 2022. Between April 2022 and November 2024, the CBN raised the Monetary Policy Rate (MPR) from 11.5% to 27.5%, causing banks’ lending rates to soar above 30%. This high-interest regime led to a 6.67% quarter-on-quarter drop in credit to manufacturers, falling to ₦8.67 trillion in Q3 2024 from ₦9.29 trillion in Q2. Industry experts highlighted that manufacturers are delaying investments or exploring alternative funding sources as borrowing becomes increasingly unfeasible.
Economic challenges, including rising inflation, energy costs, currency depreciation, and a weakening naira, have exacerbated manufacturers’ struggles. Many rely on imports, making them vulnerable to exchange rate volatility. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, noted that most outstanding bank loans represent existing credit manufacturers are struggling to service, as new facilities are untenable at exorbitant rates. The Manufacturers Association of Nigeria (MAN) stressed that high borrowing costs, coupled with dwindling consumer purchasing power, discourage investments in the sector, which relies heavily on credit for operations and expansion.
The cautious lending stance of banks, concerned about non-performing loans, further compounds the situation. Analysts emphasized that Nigeria’s restrictive monetary policies have stifled manufacturing growth, prompting some companies to exit the market. Experts urge the Federal Government and the CBN to implement supportive policies to alleviate manufacturers’ burdens. Addressing issues such as energy costs, logistics challenges, and currency stability is seen as critical to revitalizing the sector and fostering long-term economic growth.
