Manufacturers Call for Urgent Reduction in Interest Rates to Protect Nigeria’s Industrial Base
As Finance Costs Surge by 44% to N2.06trn in 2024
Manufacturers in Nigeria have urgently called on the Central Bank of Nigeria (CBN) to reduce interest rates, citing the detrimental impact of the current rate regime on the country’s industrial base. The high cost of borrowing is significantly straining businesses, with finance costs surging by over 44%—from N1.43 trillion in 2023 to N2.06 trillion in 2024.
The Monetary Policy Committee (MPC) of the CBN, in its 300th meeting, recently decided to maintain key policy parameters unchanged, with the Monetary Policy Rate (MPR) at 27.5%, a decision that has sparked concern among manufacturers. Other parameters remained the same: the Asymmetric Corridor around the MPR at +500/-100, Cash Reserve Ratio (CRR) for commercial and merchant banks at 50% and 16%, respectively, and the liquidity ratio at 30%.
Segun Ajayi-Kadir, Director-General of the Manufacturers Association of Nigeria (MAN), expressed deep concern over the CBN’s continued high interest rates, noting that this policy contrasts sharply with global trends where many countries are lowering rates to stimulate economic growth.
Ajayi-Kadir pointed out that Nigeria now ranks as the sixth most expensive country for credit, with local lending rates exceeding 37%, putting a severe strain on the manufacturing sector. He emphasized that the inability to access affordable financing was threatening Nigeria’s ‘Nigeria First Policy’, which is aimed at strengthening local industries.
He also noted that the Manufacturer’s CEO Confidence Index had dropped from 50.7 to 48.3 points, signaling growing concern within the sector. High interest rates, while attracting short-term foreign investment, are seen as damaging to domestic industries and limiting sustained economic growth.
MAN has called on the CBN to reconsider its monetary policy, advocating for substantial cuts to the benchmark interest rate. They also requested incentives for commercial banks to offer concessionary rates, the approval of N1 trillion for distressed manufacturers, and an increase in the capital base of the Bank of Industry.
Dr. Chinyere Almona, Director-General of the Lagos Chamber of Commerce and Industry (LCCI), while acknowledging the need for caution, also emphasized the challenges faced by Nigeria’s economic landscape. The headline inflation has slightly decreased to 23.71%, but inflation, exchange rate volatility, and rising costs continue to burden the economy. Almona cautioned that a premature interest rate cut could undermine investor confidence and destabilize the economy.
She urged the MPC to provide a data-driven roadmap for potential future interest rate reductions, ensuring that any decisions are based on sustained disinflation, foreign exchange stability, and recovery in the real sector, particularly micro, small, and medium-sized enterprises (MSMEs).
Almona also stressed that the high MPR continues to hinder private sector growth, particularly affecting MSMEs. She advocated for coordinated efforts with fiscal authorities to address the root causes of inflation.
The LCCI’s recommendations include supporting production-focused reforms, enhancing development finance for key sectors, promoting transparency in lending rates, and stabilizing the foreign exchange market. The LCCI supports a balanced approach that contains inflation while revitalizing Nigeria’s economy through data-informed monetary policies and strategic sector support.
