Manufacturers Still Pay 32 Percent Interest as High Credit Costs Squeeze Industry

• Manufacturers paid an average 32.1 percent interest rate on loans in 2025, down from 35.6 percent in 2024.

• All major industrial sectors recorded average borrowing costs above 30 per cent during the year.

• MAN said easing inflation, energy prices and naira stability helped lower financing costs, but rates remained a major constraint on investment.

September 02, () — Nigerian manufacturers continued to face exceptionally high borrowing costs in 2025, with average interest rates remaining above 30 percent across all major industrial sectors despite a modest easing from the previous year.

According to data from the Manufacturers Association of Nigeria (MAN), the average interest rate administered to manufacturers fell to 32.1 percent in 2025, compared with 35.6 percent recorded in 2024.

The average lending rate stood at 32.5 per cent in the first half of 2025 before moderating to 31.8 per cent in the second half, indicating some improvement in credit conditions as the year progressed.

However, the relatively small decline was not enough to significantly ease the financing burden on manufacturers, with every sector surveyed recording an annual average borrowing rate of at least 30.4 percent.

Chemical, wood sectors record lowest rates

The chemical and pharmaceuticals sector recorded the lowest average borrowing rate at 30.4 percent in 2025.

Wood and wood products, including furniture, followed with an average rate of 30.8 percent, while manufacturers in textiles, wearing apparel, carpet, leather, and leather footwear paid an average of 31.6 percent.

Metal, iron, steel and fabricated metal manufacturers faced an average borrowing cost of 32.3 percent, while electrical and electronics manufacturers recorded 32.4 percent.

Food, beverage and tobacco manufacturers paid an average interest rate of 32.5 percent, while domestic and industrial plastic, rubber and foam manufacturers recorded 32.6 percent.

Motor vehicle and miscellaneous assembly manufacturers, alongside pulp, paper and paper products, printing, publishing and packaging companies, faced an average rate of 32.8 percent.

Non-metallic mineral products recorded the highest average borrowing cost at 33 percent.

Easing conditions fail to lift financing burden

MAN said the moderation in borrowing costs reflected improving economic conditions during the year.

The association pointed to softer headline inflation, more stable energy prices and sustained appreciation of the naira as factors that supported the gradual easing in interest rates.

Despite these improvements, the association maintained that financing costs remained high and continued to pose a substantial hurdle to manufacturing competitiveness and output growth.

For manufacturers, the impact extends beyond the cost of servicing existing loans. High lending rates increase the cost of financing production, purchasing raw materials, maintaining working capital and funding expansion.

The data therefore suggests that the modest decline in interest rates in 2025 did not translate into significantly cheaper credit for the real sector.

With manufacturers still borrowing at rates exceeding 30 percent, businesses face limited room to invest in new production capacity, modernise equipment or expand operations without significantly increasing their financial obligations.

The persistent gap between the cost of credit and the returns available in many manufacturing activities could continue to constrain private-sector investment and limit the sector’s ability to contribute more strongly to economic growth.

For the manufacturing sector, therefore, the easing in borrowing costs represents an improvement, but not yet a meaningful resolution of the financing challenge.