The Manufacturers Association of Nigeria, MAN, is becoming increasingly challenged by lack of access to funds which has negatively impacted performance over time.
The Manufacturers are currently battling cost of funds which usually comes at double-digit and this has had a direct impact on the cost of production and the competitiveness of the sector, it said in a recent report.
According to MAN, the majority (76 per cent) of manufacturers enumerated in the fieldwork of the report disagreed that the rate at which commercial banks lent to manufacturers encouraged productivity in the sector.
Report shows that manufacturers combined debt to local banks went up to N3.71 trillion having borrowed N520 billion from January to August.
Financial sectors credit to the sector stood at 16.3 per cent in the eight-month period from N3.19tn as of December 2020, according to the sectoral analysis of deposit money banks’ credit by the Central Bank of Nigeria, CBN.
The sector received the second-biggest share of the credit from the banks after the oil and gas sector, which got N5.47tn as of August 2021.
The Association’s Report medicated that about 13 per cent of those sampled agreed that the current lending rate encourages productivity in the sector while the remaining 11 per cent were not sure. It is therefore expedient for the CBN to take up rigorous monetary management measures that would encourage a reduction in lending rates on loans offered to the productive sector by the commercial banks.
“With the Monetary Policy Rate standing currently at 11.5 per cent, there may not be a credible reason the average lending rate to manufacturers by the banks is still as high 22 per cent as revealed by MAN survey of the sector.”
MAN said lending to the real and the manufacturing sectors had dwindled over the years due to the increased presence of the government in the Nigerian money market.
It said, “Government Treasury Bill, bonds, Sukuk, etc. have almost crowded out private sector borrowing in the market. It is therefore pertinent that government balances its participation at money market with the interest of the private sector.”
It would be recalled that the Monetary Policy Committee, MPC, of the CBN at its last meeting observed that the manufacturing and non-manufacturing Purchasing Manager’s Indices improved in August to 46.9 index points each, compared with 46.6 and 44.8 index points, respectively, in July.
This attributed to an increase in new orders, driven largely by rising demand, uptrend in business activity and further normalisation of economic activities.
Equally, employment level index component of the manufacturing and non-manufacturing PMIs in August improved to 49.4 and 48.8 index points, respectively, compared with 46.5 and 47.0 index points in July.
The committee expressed optimism that with the current level of monetary and fiscal stimuli, as well as efforts to increase vaccination and contain the COVID-19 pandemic, the economy would continue to improve in the short to medium term.