Manufacturers Seek Further Interest Rate Cuts To Spur Growth

The Manufacturers Association of Nigeria (MAN) has called for cuts in interest rates to alleviate borrowing costs and boost growth within the manufacturing sector.

This appeal follows the Monetary Policy Committee (MPC) meeting, where the Central Bank of Nigeria (CBN) decided to maintain the benchmark interest rate at 27 per cent and adjust the Standing Facilities Corridor to +50/-450 basis points.

The aim of these adjustments is to enhance liquidity and encourage commercial banks to increase lending.

The association, however, commended the MPC’s decision to pause the interest rate hike and preserve the 27 per cent rate established at the previous meeting, as well as the adjustments made to improve liquidity.

However, it emphasised the need for a further reduction in rates to make borrowing more affordable for manufacturers.

The director-general of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir said that despite the recent decision, borrowing costs ranging from 30 to 37 per cent remain a significant barrier for manufacturers.

Ajayi-Kadir noted that these elevated rates not only hamper production but also diminish the sector’s competitiveness.

He 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).

He added 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, incentivise 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 capitalise on emerging macroeconomic stability, MAN recommended that the Central Bank consider a downward revision of rates in future MPC meetings.

The MAN DG stated that this would help alleviate the burden of high borrowing costs and support long-term investments, especially in capital-intensive segments of manufacturing.

He added that “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 emphasised 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.