Manufacturers are anticipating improved access to bank credit following recent monetary policy easing, after lending by Nigerian deposit money banks to the sector dropped to N7.09tn in September 2025, reflecting the tight credit conditions under which the industry operated during the year.
An analysis of the Central Bank of Nigeria’s third-quarter 2025 statistical bulletin showed that bank lending to manufacturers fell by about N1.44tn or 16.9 per cent from its peak within the first nine months of 2025. The recent Monetary Policy Rate was eased to 26.5 per cent in February 2026, drawing cautious optimism among real-sector operators, especially manufacturers.
The data indicated that credit allocated to the manufacturing sector stood at N8.31tn in January 2025, before declining steadily to N7.09tn by June. Although lending recovered slightly in July and August, it dropped again to N7.09tn in September, highlighting the pressure manufacturers faced in accessing financing for production and expansion.
The data showed that the manufacturing sector’s credit exposure from banks fluctuated throughout the first nine months of 2025: January was N8.31tn, February N8.03tn, March dropped to N7.72tn, April increased to N7.90tn marginally, May declined to N7.82tn, June dropped further to N7.09tn, July N7.28tn, August N7.43tn and September N7.09tn.
This trend contrasts sharply with 2024, when credit exposure remained consistently higher, peaking at N10.88tn in February 2024 and staying above N8.47tn for most of the year.
Industry stakeholders said the decline reflects the impact of high interest rates and tight financial conditions that limited manufacturers’ ability to borrow for expansion and working capital.
The Central Bank of Nigeria maintained an aggressive monetary tightening cycle in recent years, pushing the Monetary Policy Rate to a historic high of 27.5 per cent, a level manufacturers repeatedly criticised for making borrowing prohibitively expensive. The MPR serves as the benchmark for commercial banks to set rates.
Notably, the apex bank began easing policy in 2025 as inflation moderated, cutting the benchmark interest rate by 50 basis points to 27 per cent, before reducing it further to 26.5 per cent in February 2026.
The Manufacturers Association of Nigeria said deeper rate cuts would be required to significantly reduce borrowing costs and stimulate industrial investment.
The association stated in its Manufacturers CEO Confidence Index report that, “The time has come for the apex bank to take a bolder step by introducing a deeper rate cut that can meaningfully lower the cost of credit and stimulate real sector investment. Growth cannot thrive where capital remains prohibitively expensive.”
The Director-General of the Manufacturers Association of Nigeria, Mr Segun Ajayi-Kadir, said the recent reduction in the policy rate could still provide relief for manufacturers if banks transmit the lower rates to borrowers.
Ajayi-Kadir said, “The Monetary Policy Committee of CBN announced the reduction of the benchmark interest rate by 50 basis points from 27 per cent to 26.5 per cent at the end of the committee’s 304th meeting held on February 23 and 24, 2026.”
He added, “Although the 50 basis points cut looks inconsequential, the implication for the economy, especially in the manufacturing sector, is significant.”
MAN’s DG noted that the real sector will only benefit fully if lending rates decline and macroeconomic stability improves.
Ajayi-Kadir said, “Currently, the lending rates from commercial banks hover around 32 per cent to 37 per cent. A reduction in the Monetary Policy Rate by the Central Bank of Nigeria will have positive impacts on the real sector through several key channels.”
He explained that lower borrowing costs would allow businesses to invest more in machinery, expand operations, and increase working capital.
Ajayi-Kadir said, “The rate reduction implies that commercial banks will reduce the rate from the current 32–37 per cent range and businesses can access cheaper loans thereby investing more in machinery, expansion of businesses and working capital. This will increase production capacity, encourage hiring of more workers and expand the performance of SMEs.”
Economic analysts also said the ongoing easing cycle could support investment and credit expansion if macroeconomic stability continues.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the rate cuts send a positive signal to investors and businesses.
Yusuf said, “The rate cut sends a positive signal to investors and the business community. A moderation in the policy rate, even if incremental, supports improved investor sentiment, gradual easing of financing conditions, strengthening of private-sector confidence and prospects for credit expansion.”
However, he warned that the impact of the rate cuts may remain limited unless structural constraints in the financial system are addressed.
Yusuf said, “A major concern remains the weak transmission mechanism between monetary policy adjustments and actual lending rates in the real economy.”
He explained that lending rates remain elevated due to factors such as the high Cash Reserve Ratio, high cost of deposits, risk premiums, and government borrowing.
Yusuf said, “Unless these structural rigidities are addressed, the benefits of monetary easing may not fully translate into lower borrowing costs for manufacturers, SMEs, agriculture and other productive sectors.”
Manufacturers expect further easing in the benchmark interest rate to around 23 per cent by 2026, as projected in the Manufacturers CEO Confidence Index report, which could support stronger credit flows to the sector.
Industry stakeholders said sustained monetary easing, combined with improvements in power supply, logistics, and security, would help revive investment and boost output in Nigeria’s manufacturing sector.
