Manufacturers urge CBN to cut rates as lending costs rise
Agency Report
The Manufacturers Association of Nigeria (MAN) has called on the Central Bank of Nigeria (CBN) to review its current monetary policy stance and implement a much-needed interest rate cut to revitalize the country’s struggling manufacturing and agricultural sectors.
The appeal follows the outcome of the 301st meeting of the CBN’s Monetary Policy Committee (MPC), held on July 21 and 22, 2025, where the apex bank opted to retain the Monetary Policy Rate (MPR) at 27.5 per cent.
While acknowledging the committee’s commitment to macroeconomic stability, MAN argues that the prolonged high-interest environment is throttling productive investment and worsening economic output in key sectors.
According to MAN, lending rates to the manufacturing sector have surged to over 35 per cent, a situation it says is unsustainable for businesses already burdened by inflation, exchange rate instability, and high operating costs.
The association disclosed that in 2024 alone, capacity utilization in the sector declined to 57 per cent, while unsold inventory more than doubled — jumping from N1.14 trillion in 2023 to N2.14 trillion in 2024.
“These figures paint a grim picture of an economy in which producers are unable to expand operations or invest in new production lines due to prohibitively high financing costs,” MAN said in a statement.
“Our expectation is for a rate cut that is backed by strong fiscal coordination — one that can ensure better access to credit, support local production, and ultimately lift the economy.”
Dr. Chuka Obiora, an economist and former MPC member, said the CBN must balance inflation control with economic growth. “Inflation is a serious concern, but strangling the productive sector to tame it could backfire,” he noted.
“A marginal rate cut could offer breathing space for manufacturers and help stimulate supply-side responses to inflation.”
Similarly, Prof. Grace Adebayo, a development economist at the University of Lagos, said the CBN needs to adopt a more nuanced approach. “Maintaining such high rates without targeted credit interventions for productive sectors is counterproductive,” she said.
“You cannot expect manufacturers to thrive when loans come with interest rates above 30 per cent.”
Despite a slight decline in the headline inflation rate to 22.22 per cent in June 2025 — down from 22.97 per cent in May — food inflation continues to climb, driven by insecurity, supply chain constraints, and high production costs.
MAN believes that only a policy shift favoring domestic production and investment can reverse the trend.
CBN Governor, Dr. Olayemi Cardoso, who briefed journalists after the MPC meeting, said the decision to retain the MPR at 27.5 per cent was taken to sustain the recent disinflationary momentum and manage inflation expectations.
With growing calls for more pro-growth measures, attention now shifts to whether the apex bank will consider sector-specific relief or wait for broader macroeconomic improvements before acting.
