27.5% MPR: MAN, LCCI, NECA Lament Prohibitively Expensive Credit
•Say Nigeria now sixth most expensive credit market globally
•Finance costs surged by over 44% from N1.43trn in 2023 to N2.06trn in 2024
Dike Onwuamaeze
The Manufacturers Association of Nigeria (MAN), the Lagos Chamber of Commerce and Industry (LCCI) and the Nigeria Employers’ Consultative Association (NECA) yesterday lamented the continued decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to maintain the Monetary Policy Rate (MPR) at 27.5 per cent since November 2024, despite a global wave of interest rate reductions aimed at revitalising economic productivity and combating stagflation.
Specifically, the LCCI stressed that the current MPR level was prohibitively high for private sector development.
Likewise, NECA expressed concern over the CBN’s continued reliance on monetary policy tightening.
The MPC at the end of its meeting on Tuesday decided to keep all its monetary policy tools unchanged.
The manufacturers’ association expressed its view in a statement titled, “MAN Calls for Urgent Interest Rate Cut to Protect Nigeria’s Industrial Base,” signed by the Director General of MAN, Mr. Segun Ajayi-Kadir.
Ajayi-Kadir said the CBN was given to seeking to attract speculative foreign portfolio investors at the expense of Nigeria’s manufacturing base, which is now choked by unsustainable borrowing costs.
MAN stated that the rigid stance of the MPC has continued to create unintended consequences that might deepen the parlous performance of the productive sector and earnestly, “beseech the CBN to urgently reconsider its monetary stance.”
He said: “A nation cannot industrialise on the back of prohibitively expensive credit. With the benchmark interest rate held at 27.5 per cent, Nigeria has become the 6th most expensive country to source credit as local manufacturers grapple with an average lending rate of over 37 percent.
“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 even large-scale—are finding it increasingly difficult to stay afloat, expand production lines, or even meet basic operational costs.”
Ajayi-Kadir argued that domestic production would fall with highly-priced credit, which he said could constrain the country to “imports poverty” by relying on extensive importation of manufactured goods.
He added: “Our concerns go beyond the debilitating impact on our numbers business. The ‘Nigeria First Policy,’ which seeks to strengthen local industry and reduce import dependence, may be under severe threat.
“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 over 44 percent from ₦1.43 trillion in 2023 to ₦2.06 trillion in 2024 and rising.
“This represents a sharp increase that has directly depressed productivity and led to underutilisation of industrial capacity.”
The director general of MAN noted that 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 added 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, which mirrored the growing anxiety of manufacturers.
“A nation that woos 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 a high interest rate of 27.5 percent 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,” he said.
Ajayi-Kadir pointed out that what was evident now in the Nigerian economy was the contrast between the widening profitability of the banking sector buoyed by elevated interest margins and manufacturers’ shrinking margins, rising debts, and declining productivity.
He declared that this was 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,” said Ajayi-Kadir, who warned that “a society that rewards intermediaries over producers invites long-term decline.”
He described access to affordable credit as “the oxygen that sustains industrial growth,” adding that no economy has ever grown by starving its manufacturers of oxygen.
He further argued that recent disinflationary trends provided justification for the CBN to cut rates as the improvement in the real interest rates has given financial investors higher inflation-adjusted returns.
He added that, “maintaining a high nominal interest rate under current inflation conditions is neither necessary nor justifiable, and will only prolong the pain for manufacturers and consumers alike.”
MAN, therefore, called on the CBN to cut the benchmark interest rate significantly to reflect current realities and ease the credit burden on manufacturers.
It also said the CBN should deploy moral suasion and policy incentives for commercial banks to facilitate single-digit concessionary interest rates to the manufacturing sector and also facilitate the approval of the N1 trillion earmarked for manufacturers under the Stabilisation Plan to support industries struggling under current financial pressures.
It also called on the CBN to 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, adding that the CBN should, “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, which will also improve access to non-locally available raw materials.”
MAN also demanded that the CBN should facilitate a policy direction that would peg the customs duty exchange rate for importing industrial inputs, especially raw materials and machinery, to prevent further inflationary pass-through effect.
“Industrial confidence is a fragile currency and once broken, it takes time to rebuild. Nigeria cannot afford to lose its manufacturing momentum at a time when the world is repositioning for the next wave of industrial transformation.
“The commendable reform measures of this administration may not be helped by the persistent high cost and constrained access to funds.
“The current monetary policy is not only undermining manufacturers’ confidence but also jeopardising national economic resilience.
“We urge the central bank to act decisively and in synergy with the fiscal authority to ensure that Nigeria’s manufacturing sector does not sink deeper into stagnation. The time to act is now,” Ajayi-Kadir said.
Reacting to Tuesday’s decisions of the MPC, the Director General of the LCCI, Dr. Chinyere Almona, said the current MPR level remained prohibitively high for private sector development.
Almona said: “MSMEs, the engine of job creation and productivity in Nigeria, are being squeezed by the high cost of credit.
“Without affordable financing, their capacity to grow, compete, and contribute to economic development is severely limited.”
Similarly, NECA expressed concern over the CBN’s continued reliance on monetary policy tightening.
Speaking on the MPC outcome, the Director-General of NECA, Mr. Adewale Smatt Oyerinde, said: “The decision to retain the MPR, CRR and other policy instruments highlight the CBN’s intention to control inflation.
“However, monetary tightening, in isolation of other critical considerations cannot deliver the comprehensive economic stability the country urgently needs.”
Oyerinde added that businesses have continued to suffer under the weight of exorbitant borrowing costs, even when other economies are progressively reducing the cost of borrowing to stimulate growth.
He noted that while headline inflation figures offer a glimmer of hope, they mask the more deep-rooted structural challenges facing the Nigerian economy.
“The marginal drop in inflation must not obscure the deeper structural constraints, particularly in food production and energy supply.
“The cost of doing business remains alarmingly high, and without urgent reforms, the productive sector will continue to struggle,” Oyerinde added.
NECA reiterated the urgent need for a coordinated policy response that goes beyond rate adjustments.
It said strategic fiscal interventions, such as increased investments in transport infrastructure, power supply, and agricultural value chains would reduce production costs and ease inflationary pressures from supply side.
“The government must act decisively to secure farming communities, improve access to quality agricultural inputs and mechanisation, and address logistics bottlenecks.
“These steps are essential to improving supply-side resilience and unlocking productivity,” he added.
“The association emphasised that with over 80 percent of Nigeria’s labour force engaged in the informal and agrarian sectors, neglecting the structural side of inflation only exacerbates existing inequalities and stunts inclusive growth,” NECA said.
NECA added that, “a holistic and inclusive approach is necessary, one that stimulates investment, fosters job creation, and ensures that the fight against inflation does not inadvertently become a brake on development.”
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