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Manufacturers Call on CBN to Lower Interest Rates to Boost Industrial Growth
The Manufacturers Association of Nigeria (MAN) has appealed to the Central Bank of Nigeria (CBN) to implement further reductions in interest rates. This move aims to alleviate the escalating borrowing costs that continue to hamper production efficiency and diminish the competitiveness of Nigeria’s manufacturing sector.
Monetary Policy Committee’s Recent Decisions and Industry Response
Following the Monetary Policy Committee (MPC) meeting held on November 24-25, the CBN opted to maintain the Monetary Policy Rate (MPR) at 27%. The MPC also adjusted the Standing Facilities Corridor to +50/-450 basis points, kept the Cash Reserve Ratio at 45% for commercial banks and 16% for merchant banks, and preserved the liquidity ratio at 30%. These measures were taken amid signs of improving macroeconomic stability, including a notable slowdown in inflation, which dropped to 16.05% in October.
Despite acknowledging these positive developments, MAN expressed concerns that the current lending rates remain excessively high for manufacturers. Segun Ajayi-Kadir, MAN’s Director-General, emphasized that while the decision to hold the MPR steady was welcomed, the sector had anticipated a reduction to ease borrowing expenses.
Impact of High Borrowing Costs on Manufacturing Competitiveness
Ajayi-Kadir highlighted that manufacturers are still grappling with borrowing rates between 30% and 37%, which he described as “prohibitively expensive and detrimental to the sector’s competitiveness.” He stressed that such rates restrict production capacity and discourage investment, particularly in capital-intensive industries.
“Maintaining exchange rate stability and improving foreign exchange liquidity are important,” Ajayi-Kadir noted, “but lowering the cost of capital is equally critical to stimulate borrowing for expansion and innovation.”
Structural Challenges Exacerbating Production Costs
Beyond high interest rates, MAN pointed to persistent structural obstacles that inflate production expenses. These include inadequate infrastructure, elevated logistics costs, unreliable electricity supply, soaring energy prices, and security challenges. Collectively, these factors undermine the sector’s ability to compete both locally and internationally.
Recommendations for Policy Coordination and Sectoral Growth
MAN urged enhanced collaboration between monetary and fiscal authorities to unlock the manufacturing sector’s full potential. The association recommended that the CBN consider gradual interest rate reductions in upcoming MPC meetings to encourage long-term investments and ease the financial burden on manufacturers.
Additionally, MAN proposed the introduction of innovative policy tools to improve credit accessibility for the real sector. It also called on the Federal Government to intensify fiscal discipline and increase investments in critical infrastructure such as roads, power supply, and logistics networks to support industrial expansion.
Exchange Rate Stability and Inflation Management
On currency management, MAN emphasized the need for close cooperation between the government and the CBN to stabilize the naira and mitigate risks associated with capital flight, especially in light of the recent MPC corridor adjustments designed to encourage bank lending.
The association also advocated for complementary fiscal policies that foster industrial development, promote structural reforms across agriculture, manufacturing, and energy sectors, and address inflationary pressures. It underscored the urgency of resolving security issues in agricultural and industrial zones to ensure steady raw material supplies and food production, which are vital for sustained industrial growth.
Looking Ahead: Monitoring and Sustaining Economic Progress
While commending the MPC’s efforts to enhance liquidity and stimulate lending, MAN stressed the importance of leveraging these measures to drive credit-led growth in productive sectors. The association called on the CBN to continuously assess the impact of its monetary policies on credit availability to the real economy to guide future decisions.
In conclusion, MAN reaffirmed its support for the CBN’s initiatives to stabilize the economy but emphasized that stronger synergy between fiscal and monetary policies is crucial to translate MPC decisions into tangible benefits for the manufacturing sector, fostering inclusive economic growth and development.
Private Sector’s Unified Call for Interest Rate Reduction
Similarly, other organized private sector groups have echoed calls for the CBN to lower interest rates. While recognizing the MPC’s rationale for maintaining the benchmark rate to preserve economic stability, these stakeholders remain hopeful for future rate cuts to further stimulate business activities and investment.
