Manufacturers Seek Cheaper Credit After CBN’s 350bp Rate Cut

• Manufacturers welcomed the CBN’s cut in the MPR to 23 percent but said cheaper bank loans would determine its impact on production.

• MAN said lending rates of 27–30 percent would remain too high for manufacturers despite the rate cut.

• The group called for lower reserve requirements and dedicated single-digit financing to support industrial investment.

September 25, () – Manufacturers have urged commercial banks to transmit the Central Bank of Nigeria’s latest interest-rate cut to their lending rates, saying cheaper credit is needed to translate monetary easing into lower production costs and stronger industrial activity.

The Manufacturers Association of Nigeria (MAN) welcomed the CBN Monetary Policy Committee’s decision to cut the Monetary Policy Rate (MPR) by 350 basis points to 23 percent from 26.5 percent, but said the key issue for businesses was the cost of actual bank loans.

The MPC announced the cut at the end of its 307th meeting in Abuja on Tuesday, after holding the rate at its previous two meetings. The decision followed a 50-basis-point reduction announced in February.

‘Rate Cut Is Relief, Not Stimulus’

Segun Ajayi-Kadir, Director-General of MAN, described the decision as a positive signal but said manufacturers were looking for a clear transmission from the policy rate to commercial lending rates.

“The decision of the MPC to cut MPR to 23 percent is a commendable step in the right direction, but we seek an intentional transition to lending rates,” he said.

Ajayi-Kadir said manufacturers remained concerned that lending rates could stay around 27–30 percent even after the MPR reduction.

“Even at 23 percent MPR, the prime lending rate will still be 27–30 percent. No manufacturer anywhere in the world can be competitive borrowing at 30 percent”, he said.

He described the new policy rate as “a welcome relief, not yet a stimulus”, arguing that manufacturers in countries including Egypt, Morocco and South Africa have access to borrowing rates of about 8–12 percent.

MAN also called for further monetary and fiscal measures, including a reduction in the 45 per cent Cash Reserve Ratio, the operationalisation of the N1tn Manufacturing Stabilisation Fund at nine per cent, and a dedicated single-digit lending window for manufacturers.

The association also proposed a five per cent development-finance rate for small and medium-sized enterprises.

Industry Seeks Broader Cost Relief

Ajayi-Kadir said lower interest rates alone would not resolve the competitiveness challenges facing manufacturers.

He called for further easing towards a sub-15 percent MPR over the medium term, alongside measures to reduce power, foreign exchange, logistics and multiple-taxation costs, which he said add more than 40 percent to production expenses.

“We cannot have disinflation on paper and high cost of credit in the factory,” he said.

Segun Kuti-George, National Vice President of the National Association of Small-Scale Industrialists, also welcomed the rate cut, saying cheaper borrowing could make it easier for manufacturers to finance inventories, equipment and business expansion.

However, he cautioned that increased liquidity could also add to inflationary pressures if more money circulated without a corresponding increase in productive output.

Kuti-George said Nigeria’s borrowing costs remained high compared with some other African economies, citing Ghana and Benin Republic, where he said businesses could access credit at rates of about 11–12 percent and, in some cases, lower.

For manufacturers, the immediate test of the CBN’s policy shift will therefore be whether commercial lending rates decline sufficiently to reduce financing costs and support new investment, rather than the MPR cut alone.