Manufacturers seek interest rate cut to protect Nigeria’s industrial base

The Manufacturers Association of Nigeria (MAN) has urged the Central Bank of Nigeria (CBN) to reconsider its monetary stance in alignment with global wave of interest rate reductions.

This, MAN, said was with a view to revitalise economic productivity and combat stagflation.

The Director General of MAN, Segun Ajayi-Kadir, reacting to the CBN’s decision to maintain the Monetary Policy Rate (MPR) at 27.5 per cent, on Wednesday in Lagos, argued that maintaining a high nominal interest rate under current inflation conditions was neither necessary nor justifiable, and would only prolong the pain for manufacturers and consumers alike.

He noted that while most progressive economies were charting a course toward industrial recovery and macroeconomic stability, Nigeria’s monetary stance appeared tended to a different direction.

He said that over the last quarter, countries in the Euro Area, the United Kingdom, Denmark, Australia, China, India, Thailand and Egypt, had implemented interest rate cuts.

“Yet, our rigidity continues to create unintended consequences that may deepen the parlous performance of the productive sector,” he said.

The MAN DG affirmed that a nation could not industrialise on the back of prohibitively expensive credit.

He added that with the benchmark interest rate held at 27.5 per cent, Nigeria had become the sixth most expensive country to source credit with local manufacturers grappling an average lending rate of more than 37 per cent.

Ajayi-Kadir also noted that recent de-inflationary trends provided justification for the CBN to cut rates.

According to him, real interest rates have improved, already giving financial investors higher inflation-adjusted returns.

“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.

“Unfortunately, the current interest rate regime constrains finance costs for our members, surging by more than 44 per cent from N1.43 trillion in 2023 to N2.06 trillion in 2024 and rising,” he said.

The MAN DG urged the CBN to cut the benchmark interest rate significantly to reflect current realities and ease the credit burden on manufacturers.

He also stressed the need to deploy moral suasion and policy incentives to commercial banks to facilitate single-digit, concessionary interest rates to the manufacturing sector.

Ajayi-Kadir also called for the approval and facilitation of the N1 trillion earmarked for manufacturers under the stabilisation plan to support industries struggling under current financial pressures.

“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 CBN to act decisively and in synergy with the fiscal authority to ensure that Nigeria’s manufacturing sector does not sink deeper into stagnation,” he added. (NAN)