Nigeria manufacturers groan as high credit, production costs threaten recovery

Nigerian manufacturers are grappling with substantial obstacles to economic recovery, primarily driven by the high cost of credit and escalating production expenses. The Manufacturers Association of Nigeria (MAN) highlighted in its latest report that limited access to finance remains the most critical challenge, with a significant majority of executives pointing to commercial bank lending rates as a major deterrent to productivity.

The report indicates that the volume of credit available to the sector is insufficient. Manufacturers directly link the elevated cost of borrowing to the Central Bank of Nigeria's monetary policy, specifically the Monetary Policy Rate (MPR) of 26.5 percent. This high-interest-rate environment inflates credit and production costs, consequently weakening the sector's capacity for expansion, investment, and job creation.

Despite a modest improvement in manufacturers' confidence, rising energy, distribution, shipping, and raw material costs continue to constrain productivity. While reforms in the foreign exchange market have brought some stability, about half of the surveyed manufacturers report that these improvements have not translated into sufficient foreign exchange access for their operations. This scarcity limits their ability to operate at full capacity and increases the cost of imported inputs and machinery.

Furthermore, only a minority of manufacturing executives find government expenditure on infrastructure encouraging, signaling concerns about the slow impact of public investments on productivity. The persistent challenges of power outages, inadequate foreign exchange, high production costs, raw material shortages, multiple taxation, and insufficient government infrastructure continue to hinder the sector's potential.

“

Two in every three CEOs cited commercial bank lending rates as a disincentive to manufacturing productivity.