Manufacturers eye credit boost beyond N7.09tn as lending pressures persist
Manufacturers across Nigeria are expressing cautious optimism about improved access to bank financing following recent monetary policy easing, despite a sharp decline in lending to the sector over the past year.
Industry players believe that the Central Bank of Nigeria’s decision to begin lowering interest rates could gradually ease credit conditions and provide some relief to manufacturers who have struggled to secure affordable financing amid one of the most restrictive monetary cycles in recent years.
Data from the Central Bank of Nigeria’s third-quarter 2025 statistical bulletin show that lending by deposit money banks to the manufacturing sector fell significantly, dropping to N7.09tn by September 2025. The figure represents a decline of about N1.44tn, or roughly 16.9 per cent, compared with earlier levels recorded during the year.
The decline highlights the severe funding constraints manufacturers faced as borrowing costs surged following aggressive interest rate hikes aimed at combating inflation.
However, recent adjustments to monetary policy are beginning to raise expectations that credit conditions could gradually improve for manufacturers in the coming months.
Lending declines despite fluctuating credit flows
Analysis of the data indicates that credit exposure to the manufacturing sector followed a volatile pattern throughout the first nine months of 2025.
At the start of the year, lending stood at N8.31tn in January, before declining to N8.03tn in February and falling further to N7.72tn in March.
The sector recorded a slight recovery in April when credit rose marginally to N7.90tn, but this improvement proved temporary as lending slipped again to N7.82tn in May.
By June, the figure had dropped sharply to N7.09tn, reflecting the tightening financial conditions that made borrowing more difficult for industrial operators.
Although lending improved modestly to N7.28tn in July and N7.43tn in August, the upward trend did not last long, as the amount returned to N7.09tn by September.
Industry stakeholders say this persistent fluctuation underscores the financial pressure faced by manufacturers attempting to finance expansion projects, purchase machinery and maintain adequate working capital.
The recent decline also contrasts with lending trends recorded in 2024, when credit exposure to manufacturers remained significantly higher.
During that year, bank lending to the sector peaked at N10.88tn in February 2024 and stayed above N8.47tn for most of the year, suggesting a far more favourable credit environment compared with the current period.
High interest rates squeeze manufacturers
Experts attribute the drop in lending largely to elevated borrowing costs triggered by the Central Bank’s aggressive monetary tightening strategy.
The apex bank had raised the Monetary Policy Rate to a historic high of 27.5 per cent, pushing commercial lending rates to levels many manufacturers described as unsustainable.
Borrowing costs from banks currently range between 32 per cent and 37 per cent, according to industry stakeholders, significantly increasing the cost of financing production activities.
Manufacturers have repeatedly warned that such high interest rates discourage investment in equipment, limit expansion opportunities and reduce overall productivity within the industrial sector.
However, the recent reduction in the benchmark rate has provided some relief.
The Monetary Policy Committee lowered the policy rate by 50 basis points to 27 per cent in 2025, before cutting it again to 26.5 per cent in February 2026, signalling the beginning of a gradual easing cycle.
Manufacturers call for deeper rate cuts
The Manufacturers Association of Nigeria has welcomed the policy shift but insists that more significant reductions will be required to meaningfully improve access to credit.
According to the association’s Manufacturers CEO Confidence Index report, deeper interest rate cuts are necessary to stimulate industrial investment and support production growth.
Industry leaders argue that cheaper credit could enable companies to upgrade equipment, expand operations and hire more workers, thereby strengthening the broader economy.
They also noted that the manufacturing sector’s ability to benefit from the policy change depends largely on whether commercial banks reduce lending rates in response to the lower benchmark rate.
Analysts highlight structural constraints
Economic analysts say the ongoing monetary easing could boost investor confidence and gradually encourage banks to increase lending to productive sectors.
However, they caution that several structural factors may continue to limit the transmission of policy changes to the real economy.
These include high reserve requirements imposed on banks, elevated cost of deposits, risk premiums and the impact of government borrowing on financial markets.
Such constraints often prevent reductions in policy rates from translating directly into lower lending costs for businesses.
Experts warn that unless these structural bottlenecks are addressed, manufacturers and small businesses may continue to struggle with limited access to affordable financing.
Outlook for manufacturing credit
Despite these challenges, manufacturers remain hopeful that continued monetary easing and improved macroeconomic stability could eventually expand credit availability.
Industry projections suggest that the benchmark interest rate could decline further to around 23 per cent by 2026, a move that could significantly reduce borrowing costs across the economy.
Stakeholders also emphasise that broader reforms—such as improvements in power supply, logistics infrastructure and security—will be critical to reviving investment and boosting productivity in Nigeria’s manufacturing sector.
If such reforms are implemented alongside monetary easing, analysts believe the sector could witness stronger credit flows and renewed growth in the years ahead.
