Cut Interest Rate Now, Manufacturers Beg CBN

Manufacturers have appealed to the Central Bank of Nigeria (CBN) to cut interest rates to safeguard the industrial base from high borrowing costs.

They noted that the current interest rate regime was constraining for the members, surging by over 44 per cent from N1.43 trillion in 2023 to N2.06 trillion in 2024 and rising.

At its 300th meeting, the Monetary Policy Committee (MPC) of the CBN held all policy parameters unchanged: Monetary Policy Rate (MPR) at 27.5 per cent, Asymmetric Corridor around MPR at +500/-100, Cash Reserve Ratio (CRR) for commercial and merchant banks at 50.0 per cent and 16.0 per cent, respectively, and liquidity ratio at 30.0 per cent.

The director-general of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, expressed deep concern over the Central Bank of Nigeria’s decision to maintain the MPR at 27.5 per cent since November 2024. This decision stands in stark contrast to global trends, where countries have reduced interest rates to stimulate economic growth.

Ajayi-Kadir emphasised that “high interest rates put Nigeria in the ranks as the sixth most expensive country for credit, hindering the manufacturing sector. With local lending rates exceeding 37 per cent, manufacturers are struggling to meet operational costs, expand production, and remain viable. The inability to access affordable financing threatens the ‘Nigeria First Policy’, which aims to strengthen local industry.

He noted that “the impact is evident, as the manufacturer’s CEO’s Confidence Index had dropped from 50.7 to 48.3 points, signalling growing unease within the sector. While high interest rates may attract short-term foreign investment, they damage domestic industries and limit sustained economic growth.”
MAN urged “the CBN to reconsider its monetary policy, advocating for significant cuts to the benchmark interest rate and the implementation of incentives for commercial banks to offer concessionary rates. Additionally, they request the approval of N1 trillion for distressed manufacturers and an increase in the capital base of the Bank of Industry.”

The director-general of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, urged a cautious approach to interest rates as the Monetary Policy Committee (MPC) maintains current parameters, saying that though headline inflation had slightly decreased to 23.71 per cent, Nigeria’s economic landscape remains challenging, driven by exchange rate volatility, rising costs, and structural issues.

“A premature interest rate cut could undermine investor confidence,” he said.

She urged the MPC to provide a clear, data-driven roadmap for potential future easing, reliant on indicators such as sustained disinflation, improved foreign exchange stability, and recovery in the real sector, particularly for micro, small, and medium-sized enterprises (MSMEs).

Almona also noted that the current high MPR hinders private sector growth, particularly affecting MSMEs, as she called for coordinated efforts with fiscal authorities to address inflation’s root causes.

She proposed strategies including supporting production-focused reforms, enhancing development finance for key sectors, promoting transparency in lending rates, and stabilising the FX market.

The LCCI advocated a balanced approach that contains inflation while revitalising Nigeria’s economy through data-informed monetary policies and strategic sector support.