Decrease in Bank Lending Poses Challenges for Nigerian Manufacturers
The Manufacturers Association of Nigeria (MAN) has raised alarms regarding a troubling trend in bank lending to the manufacturing sector, which suffered a decline of N1.92 trillion, dropping from N8.53 trillion in December 2024 to N6.61 trillion by December 2025.
This statement was issued on Tuesday by Segun Ajay Kadir, the association’s Director-General, highlighting the growing financial pressures faced by manufacturers.
MAN emphasized that high borrowing costs continue to pose significant hurdles, as commercial lending rates have soared to over 35%. This surge makes it increasingly challenging for companies to access the necessary credit to sustain and grow their operations.
The association’s report indicates that the 22.5% contraction in credit is occurring amid various financial pressures, including elevated energy costs, currency volatility, and rising production expenses, all of which are straining manufacturers.
Impacts of Rising Lending Rates on Manufacturing Growth
MAN has identified prevailing lending rates as a critical barrier to both industrial growth and the broader economic diversification efforts in Nigeria. While the Central Bank of Nigeria has recently lowered the Monetary Policy Rate (MPR) to 26.5%, manufacturers are still facing an average prime lending rate of 27%, with some banks charging rates as high as 35.6%.
These elevated interest rates effectively thwart opportunities for manufacturers to obtain funding essential for long-term investments, enhancing capacity, and upgrading technology. The association aptly noted that the prohibitive cost of borrowing has become a formidable obstacle between manufacturers and access to financial liquidity.
Notably, the manufacturing sector has experienced one of the sharpest declines in credit allocation compared to other major economic sectors. Loans to manufacturing dwindled to N6.61 trillion, while the oil and gas sector witnessed a substantial gain, receiving N10.59 trillion in bank loans, and the financial sector attracted N9.24 trillion. MAN argues that this trend demonstrates lenders’ increasing propensity to favor sectors that yield quicker returns, leaving more productive industries grappling for necessary financing.
Contributing Factors to the Credit Contraction
In addition to high interest rates, MAN has attributed the deteriorating lending environment to stringent monetary policies and the risk-averse attitudes of commercial banks. As some banks maintain cash reserve ratios (CRRs) ranging from 45% to 50%, this significantly constrains the funds available for lending. MAN further pointed out that manufacturers are often required to offer collateral or equity to secure loans, a requirement that is challenging to fulfill, particularly for small and medium-sized enterprises.
Furthermore, the association has expressed deep concern over the stalled implementation of the N1 trillion Manufacturing Stabilization Fund, part of the Federal Government’s Accelerated Stabilization and Sophistication Plan (ASAP). Intended to assist manufacturers in addressing the cumulative effects of naira devaluation, surging energy costs, and rising interest rates, this fund remains unutilized almost two years after its announcement.
MAN labeled the ongoing failure to activate this fund as a series of unfulfilled promises that leaves manufacturers vulnerable. The association warns that the restricted access to affordable credit jeopardizes production capacity, discourages vital investments, and could lead to significant job losses within the sector.
Potential Long-Term Implications for Nigeria’s Industrial Agenda
The association cautioned that Nigeria’s aspirations for industrial growth could be severely undermined if manufacturing operations persist in an environment plagued by borrowing costs exceeding 30%. Additionally, they noted that an ongoing credit crunch could exacerbate supply-side inflation, as diminished domestic production amplifies reliance on imports, which in turn heightens demand for foreign currency.
Furthermore, MAN has raised alarms that the ambitious Nigeria Industrial Policy 2025 may be compromised if manufacturers lack access to the affordable financing needed for modernization and expansion efforts.
Recent Trends in Private Sector Credit
Data from the Central Bank of Nigeria (CBN) indicates that while credit to the manufacturing sector has declined, credit to the private sector overall has shown some resilience. In May 2026, private sector credit rose to N81.4 trillion, reflecting a modest increase from N80.59 trillion in April, despite the CBN’s commitment to a tight monetary policy aimed at controlling inflation.
Additional CBN figures reveal that net domestic credit increased from N120.18 trillion in April to N121.42 trillion in May, alongside an uptick in other net assets from N11.88 trillion to N12.63 trillion within the same timeframe. These developments imply that lending activity remains somewhat stable, even as borrowing costs continue to exert pressure across the economy.
