WED MAY 21 2025-theGBJournal| The Manufacturers Association of Nigeria (MAN) today slammed the decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to hold interest rate at 27.50%, while retaining all other parameters.
The manufacturers mouth piece dismissed the decision as an ”economic paradox” one which it wants rescinded to align with global wave of interest rate cuts.
While citing examples of ”progressive economies” which have implemented interest rate cuts to bolster economic recovery, such as the Euro Area, the UK, Australia, India, Egypt, China and Thailand, MAN argues that Nigeria’s monetary stance tends to lead the country in a different direction.
”Yet, our rigidity continues to create unintended consequences that may deepen the parous performance of the productive sector.”
According to MAN, ”A nation cannot industrialize on the back of prohibitively expensive credit. It adds that with the interest rate at 27.50%, Nigeria has become the 6th most expensive country to source credit as local manufacturers grapple with an average lending rate of over 37%.
”This policy is not only inflationary, but is suffocating the capacity of the manufacturing sector,” MAN said.
Compounded by other limiting factors, MAN notes that their members-small, medium and even large-scale- are finding it increasingly difficult to stay afloat, expand production lines, or even meet basic operational costs.
”When credit is priced highly, production declines and the nation imports poverty.”
MAN points out that the current interest regime constrains finance costs for its members, which it says has surged by over 44% from N1.43 trillion in 2023 to N2.06% trillion on 2024 and rising.
This represents a sharp increase that has directly depressed productivity and led to underutilization of industrial capacity.
”The high cost of credit has not only diminished the flow of investments into the manufacturing sector but has also dulled the return on existing investments with small and Medium industries hit the hardest.”
For MAN, while maintaining interest rate of 27.5% may temporarily attract speculative foreign portfolio investors, it is doing so at the expense of Nigeria’s manufacturing base, which is now choked by unstainable borrowing costs.
It said, what is evident now is the widening profitability of the banking sector, buoyed by elevated interest margins, while manufacturers contend with shrinking margins, rising debts and declining productivity.
”The current monetary policy trajectory risks turning banks into vaults of idle wealth, while the real economy-where jobs are created and value is added- faces suffocation,” MAN said.
”Maintaining a high nominal interest rate under current inflation conditions is neither necessary nor justifiable, and will only prolong the pain for manufacturers and consumers alike.”
Against this backdrop, MAN called on the CBN to;
-cut the benchmark interest rate significantly to reflect current realities and ease current burden of manufacturers
-deploy moral suasion and policy incentives for commercial banks to facilitate single-digit, concessionary interest rates to the manufacturing sector
-facilitate the approval of the N1 trillion earmarked for manufacturers under the Stabilization Plan to support industries struggling under the current financial pressure
– facilitate significant in the capital base of the Bank of Industry (BOI) to scale up its capacity to meet the sector’s growing credit demands
– settle the outstanding $2.4 billion Forex Forward Contracts to restore manufacturers’ confidence and end the unprecedented decapitation of the financial viability of the affected industries. This will also improve access to non-locally available raw materials.
-facilitate a policy direction to peg the customs duty exchange rate for importing industrial inputs, especially raw materials and machinery, to prevent further inflationary pass-through effect.
MAN urged the CBN to act ”decisively and in synergy with the fiscal authority to ensure that Nigeria’s manufacturing sector does not sink deeper into stagnation.
It says it is committed to collaborating with the government and all stakeholders to achieve macroeconomic stability.
”We therefore earnestly beseech the CBN to urgently reconsider its monetary stance. Moreover, recent disinflationary trends provide justification for the CBN to cut rates. Real interest rates have improved, already giving financial investors higher inflation-adjusted returns,” MAN notes.
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