Yemisi Izuora
The Manufacturers Association of Nigeria (MAN) has advocated for further reductions in interest rates to alleviate borrowing costs and boost growth within the manufacturing sector.
The Association made the appeal after the Monetary Policy Committee (MPC) meeting, where the Central Bank of Nigeria (CBN) decided to maintain the benchmark interest rate at 27 percent and adjust the Standing Facilities Corridor to +50/- basis points.
The aim of these adjustments is to enhance liquidity and encourage commercial banks to increase lending.
The MAN however applauded the MPC’s decision to pause the interest rate hike and preserve the 27.00 percent rate established at the last meeting, as well as the adjustments made to improve liquidity but further emphasized the need for a further reduction in rates to make borrowing more affordable for manufacturers.
According to the Director General (DG) of MAN, Mr. Segun Ajayi-Kadir, despite the recent decision, borrowing costs ranging from 30 to 37 percent remain a significant barrier for manufacturers.
Ajayi-Kadir noted that these elevated rates not only hamper production but also diminish the sector’s competitiveness.
The DG, highlighted that while stability in exchange rates and enhanced foreign exchange liquidity are crucial for manufacturers reliant on imports, reducing borrowing costs is equally essential to encourage expansion and investment.
Ajayi-Kadir pointed out that persistent high lending rates restrict access to affordable credit, particularly for small and medium-sized enterprises (SMEs), adding that, the manufacturing sector is also confronted with ongoing structural challenges, including inadequate infrastructure, high logistics costs, unreliable electricity supply, elevated energy costs, and insecurity, all of which contribute to rising production costs and eroded competitiveness.
To address these issues, MAN urged the Central Bank and policymakers to pursue initiatives that promote inclusive growth, incentivize manufacturing, and tackle the constraints limiting the sector’s performance.
“Collaboration between the CBN and fiscal authorities is vital to drive reforms that unlock the manufacturing sector’s full potential,” the Association suggested.
In light of current economic conditions and the MPC’s recent decisions, as well as the pressing need for the sector to capitalize on emerging macroeconomic stability, MAN recommended that the Central Bank consider a downward revision of rates in future MPC meetings.
He stated that this would help alleviate the burden of high borrowing costs and support long-term investments, especially in capital-intensive segments of manufacturing,,adding, “to support industrial development and ease inflationary pressures, the government should implement complementary fiscal measures and structural reforms targeting key sectors such as agriculture, manufacturing, and energy.”
He urged the CBN to monitor and evaluate the impacts of prior MPC decisions on credit access within the real sector, which will aid in making informed decisions at future meetings.
Ajayi-Kadir emphasized that while the adjustment to the MPC’s corridor is an encouraging step towards fostering a more conducive lending environment, it is imperative for the government to seize this opportunity to promote credit-led growth, particularly in productive sectors.
“By managing risks through fiscal discipline and structural reforms, stronger coordination between fiscal and monetary authorities will ensure a positive impact on the manufacturing sector, the broader economy, and sustainable development,” he stated.