With the Central Bank of Nigeria (CBN) retaining the benchmark interest rate at 27.5 per cent, local manufacturers have expressed deep concern and worry over the apex’s bank continued decision to maintain the Monetary Policy Rate (MPR) at 27.5 percent since November 2024, despite a global wave of interest rate reductions aimed at revitalising economic productivity and combating stagflation.

Speaking yesterday, the Director-General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, lamented that Nigeria has become the sixth most expensive country to source credit in the world, adding that local manufacturers can no longer cope with the average lending rate of over 37 per cent.

At over 37 per cent average interest rate, Nigeria trails behind countries like Argentina, Russia, Turkey, Brazil, Ukraine and Venezuela that have extremely high interest rates globally.

Noting that while most progressive economies are charting a course toward industrial recovery and macroeconomic stability, Nigeria’s monetary stance is leading manufacturers in a different direction.

“In the last quarter, countries such as members of the Euro area, the United Kingdom, Denmark, Australia, China, India, Thailand and Egypt, have implemented interest rate cuts to bolster economic growth and support productive sectors. Yet, our rigidity continues to create unintended consequences that may deepen the parlous performance of the productive sector.

“No nation can industrialise on the back of prohibitively expensive credit. This policy posture is not only inflationary but is suffocating the capacity of the manufacturing sector. Compounded by other limiting factors, our members—small, medium and 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”, he said.

Similarly, Director-General, the Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, expressed deep concern over rising credit and urged the CBN to provide a clear signal of possible future easing, subject to sustained economic improvements.

Adding that Nigeria’s macroeconomic conditions remain harsh due to persistent inflationary pressures, fuelled by exchange rate volatility, rising fuel and logistics costs and deep-rooted structural challenges, including insecurity and disruptions in food production; she said key indicators for future rate reductions should include a trend of disinflation over at least two to three months, improved FX liquidity and stability, and concrete signs of recovery in the real sector—particularly with respect to credit accessibility to micro, small, and medium-sized enterprises (MSMEs).

“The current MPR level remains prohibitively high for private sector development. MSMEs, the engine of job creation and productivity in Nigeria, are being strangulated by the high cost of credit. Without affordable financing, their capacity to grow, compete, and contribute to economic development is severely limited. Moreover, it is increasingly clear that monetary policy alone cannot curb inflation that stems from structural and supply-side inefficiencies. Coordinated action with fiscal authorities is essential to address the root causes of inflation, such as insecurity, infrastructure deficits, and food supply disruptions,” she said.

The MAN DG noted that the “Nigeria First Policy”, which seeks to strengthen local industry and reduce import dependence, is already under severe threat, because at the heart of its successful implementation lies access to affordable financing to boost capacity utilisation.

“Unfortunately, the current interest rate regime constrains finance costs for our members, surging by an alarming 44 per cent from N1.43 trillion in 2023 to N2.06 trillion in 2024 and rising. This represents a sharp increase that has directly depressed productivity and led to the underutilisation 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,” he said.

Regretting that confidence in the industrial outlook has waned, as evident in the dip in the Manufacturers CEO’s Confidence Index from 50.7 points to 48.3 points, he added that any nation wooing foreign portfolio investors at the expense of its real sector may unwittingly be aspiring to build prosperity on the back of volatility.

“We are disturbed by the implicit prioritisation of short-term foreign capital inflows over the long-term health of domestic industries. While maintaining 27.5 per cent may temporarily attract speculative foreign portfolio investors, it is doing so at the expense of Nigeria’s manufacturing base, which is now choked by unsustainable borrowing costs.

“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. ”

He said this is an economic paradox that must be urgently addressed. “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. A society that rewards intermediaries over producers invites long-term decline. Access to affordable credit is the oxygen that sustains industrial growth, and no economy has ever grown by starving its manufacturers of oxygen.”

Urging the CBN to urgently reconsider its monetary stance, he noted that real interest rates have improved, already giving financial investors higher inflation-adjusted returns. “We also call on the CBN to deploy policy incentives for commercial banks to facilitate single-digit, concessionary interest rates to the real sector; facilitate the approval of the N1 trillion earmarked for manufacturers under the Stabilization Plan to support industries struggling under current financial pressures; facilitate significant increase in the capital base of the Bank of Industry (BoI) to scale up its capacity to meet the sector’s growing credit demands and immediately 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. ”

“We are also urging the apex bank to 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. Nigeria cannot afford to lose its manufacturing momentum at a time when the world is repositioning for the next wave of industrial transformation. The current monetary policy is not only undermining manufacturers’ confidence but also jeopardising national economic resilience.”

On her part, Dr. Almona urged concessionary rates be given to high-impact sectors like manufacturing, agriculture, renewable energy and energy. She said development finance institutions like the Development Bank of Nigeria, Bank of Agriculture, NEXIM Bank and BoI need better funding and directions towards supporting the productive and industrial sectors of the economy.

“Promote transparency in bank lending rates to ensure borrowers are not unfairly burdened by excessive spreads above the MPR and implement measures to stabilise the FX market, reduce arbitrage opportunities, and rebuild investor confidence, critical steps for reducing imported inflation,” she said.

Urging the CBN and Federal Government to act decisively and in synergy with the fiscal authority, they said this will ensure Nigeria’s manufacturing sector does not disappear.