Manufacturers warn soaring interest rates, shrinking loans could derail Industrial Policy 2025
Sector loses N1.92tn in bank credit as borrowing costs hit 35.6%
BY FRONTLINE REPORTERS
The Manufacturers Association of Nigeria (MAN) has sounded the alarm over a worsening credit squeeze in the manufacturing sector, warning that a massive N1.92 trillion decline in bank lending could cripple industrial growth, worsen unemployment and derail Nigeria’s industrialisation agenda.
The association said the sector recorded a 22.5 per cent contraction in credit, a development it described as a serious threat to the successful implementation of the Nigeria Industrial Policy (NIP) 2025 and the country’s broader economic transformation goals.
In a statement issued yesterday, MAN Director-General, Segun Ajayi-Kadir, said the sharp drop in financing has exposed manufacturers to mounting operational pressures at a time when the nation is seeking to accelerate industrial expansion and economic diversification.
According to him, access to affordable and sustainable financing remains the lifeblood of industrial development, warning that the shrinking availability of credit could further depress capacity utilisation, delay technological upgrades and stifle job creation across the sector.
“The Nigerian manufacturing sector cannot thrive without sustainable and growing financial support. Reduced access to credit limits expansion, innovation and competitiveness, ultimately weakening the sector’s contribution to economic growth,” Ajayi-Kadir said.
MAN identified soaring borrowing costs as the primary obstacle preventing manufacturers from accessing available funds in the banking system. The association noted that average prime lending rates stood at approximately 27 per cent as of May 2026, while maximum lending rates had surged to 35.6 per cent, making long-term industrial investments increasingly unviable.
The association also blamed the Central Bank of Nigeria’s stringent Cash Reserve Ratio (CRR), estimated at between 45 and 50 per cent for commercial banks, for restricting the volume of funds available for lending to productive sectors.
Further compounding the challenge, MAN expressed concern over the continued delay in implementing the proposed N1 trillion Manufacturing Stabilisation Fund, despite its inclusion in the Federal Government’s Accelerated Stabilisation and Advancement Plan (ASAP) since 2024.
The body also lamented the suspension of new applications under the Central Bank’s development finance programmes, including the Real Sector Support Fund (RSSF), which previously provided manufacturers with access to concessionary single-digit loans.
“The withdrawal of these intervention schemes has pushed manufacturers into the commercial lending market, where interest rates above 35 per cent have made productive borrowing virtually impossible,” Ajayi-Kadir stated.
MAN warned that the sustained decline in manufacturing credit could trigger a chain reaction of negative economic consequences, including lower capacity utilisation, weaker GDP growth, job losses and rising inflation driven by reduced domestic production.
The association further cautioned that declining local manufacturing output could increase the country’s dependence on imported goods, placing additional pressure on foreign exchange reserves and undermining efforts to diversify the economy.
According to MAN, the problem is not a shortage of capital in the economy but a structural weakness in the way development finance is delivered to productive sectors.
The association argued that routing industrial intervention funds through conventional commercial banks—whose focus is often short-term profitability and stringent collateral requirements—has significantly weakened the intended developmental impact of such programmes.
To reverse the trend, MAN called for urgent reforms to Nigeria’s industrial financing framework, including the creation of dedicated financing mechanisms tailored to the long-term needs of manufacturers and other productive sectors.
The association stressed that unless decisive steps are taken to improve access to affordable credit, Nigeria risks slowing its industrialisation drive and undermining the transformative objectives of the Nigeria Industrial Policy 2025.
“The future of Nigeria’s industrial development depends on creating a financing ecosystem that supports production, innovation and long-term investment. Without urgent intervention, the country’s industrial ambitions may remain out of reach,” MAN warned.
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