High Interest Rates, Infrastructure Deficit Crippling Local Manufacturing Growth –MAN

Nigeria’s manufacturing sector has warned that persistently high interest rates and inadequate public infrastructure are significantly constraining industrial growth, forcing companies to shoulder huge operating costs that continue to erode productivity and limit capacity utilisation.

The Manufacturers Association of Nigeria (MAN) said manufacturers are increasingly burdened by the need to provide their own electricity, transportation, logistics, security and even foreign exchange, leaving many firms struggling to remain competitive.

According to the association’s Second Quarter (Q2) 2026 Manufacturers CEOs Confidence Index (MCCI), manufacturing executives identified the country’s high-interest-rate environment as the most critical challenge confronting the sector, with many businesses unable to access affordable credit needed for expansion and day-to-day operations.

Director-general of MAN, Segun Ajayi-Kadir, said the Central Bank of Nigeria’s tight monetary policy had made borrowing prohibitively expensive for manufacturers.

“Interest rates remain the highest cost of credit and directly influence production costs across the sector. As the CBN embarked on interest rate hikes to curb inflationary pressures, the manufacturing sector felt the heat,” he said.

Ajayi-Kadir acknowledged that while the Monetary Policy Rate (MPR) had recently been reduced to 26.5 per cent, it remains among the highest on the African continent.

“Although the MPR was recently slashed to 26.5 per cent and maintained there, it remains one of the highest in Africa. Consequently, there was a limited flow of finance from commercial banks to manufacturers.”

He explained that commercial banks charge lending rates far above the benchmark policy rate, effectively pricing many manufacturers out of the credit market at a time when they require working capital and investment financing.

“The situation calls for correction, recognising the manufacturing sector as a critical pillar towards achieving economic growth and employment generation,” Ajayi-Kadir added.

The report also indicated that despite increased government spending on infrastructure, manufacturers have yet to experience tangible improvements in their operating environment.

“Manufacturers were aware of the present government’s stance on bridging the country’s infrastructure deficit. Nonetheless, the spill-over effects of infrastructure expenditure had not been noticeable in the manufacturing sector.”

MAN noted that companies continue to incur huge costs in providing transport and logistics services themselves because public infrastructure remains inadequate.

The association further observed that manufacturers also spend heavily sourcing foreign exchange independently to import raw materials, spare parts and production equipment.

According to the report, the growing reliance on self-provision has become a major obstacle to improved productivity and capacity utilisation.

Ajayi-Kadir said expenses on diesel, natural gas, security, road maintenance and foreign exchange procurement now consume a substantial share of manufacturers’ operating costs, squeezing profit margins and discouraging fresh investments.

He warned that unless financing costs decline and infrastructure improves significantly, the benefits expected from recent reforms, including the Nigeria Tax Act 2025 and the Nigeria First Policy, may not translate into increased industrial output and job creation.

To reverse the trend, MAN urged the Central Bank to reduce lending costs by lowering the MPR for manufacturing loans to below 20 per cent, while prioritising foreign exchange allocation for manufacturers importing machinery and industrial raw materials.

The association also called on Ministries, Departments and Agencies (MDAs) to strictly implement Executive Orders 003 and 005 by patronising locally manufactured goods.

In addition, it urged electricity distribution companies to prioritise power supply to industrial clusters and called on the government to support factories in adopting alternative energy sources such as gas and solar power.

“Manufacturing remains central to economic diversification and job creation. But productivity will remain constrained until the cost of funds comes down and basic infrastructure becomes reliable and affordable,” Ajayi-Kadir stated.