N1.92trn credit crunch threatens Nigeria’s industrialisation drive – MAN
By Yinka Kolawole
The Manufacturers Association of Nigeria (MAN) has voiced alarms over a significant decline in bank credit to the manufacturing sector, cautioning that this trend could hinder industrial growth, exacerbate unemployment, and threaten the objectives of the Nigeria Industrial Policy (NIP) 2025.
In a statement released Tuesday, MAN Director-General Segun Ajayi-Kadir reported a 22.5% contraction in credit to the sector, totaling approximately ₦1.92 trillion. He characterized this decline as a substantial setback for Nigeria’s industrialization efforts.
Ajayi-Kadir emphasized that sustainable industrial development hinges on access to affordable financing. He warned that diminishing credit availability could stifle capacity utilization, delay technological advancements, and weaken job creation in the sector.
“The Nigerian manufacturing sector cannot thrive without sustainable and growing financial foundations,” he stated. “Reduced access to credit limits expansion, innovation, and competitiveness.”
MAN identified soaring borrowing costs as the primary barrier preventing manufacturers from tapping into available bank liquidity. As of May 2023, average prime lending rates stood at around 27%, while maximum lending rates had reached 35.6%, rendering long-term industrial investments financially unviable.
The association also pointed to the Central Bank of Nigeria’s stringent Cash Reserve Ratio (CRR)—estimated between 45% and 50% for commercial banks—as a significant policy hindrance impacting the availability of loanable funds within the banking system.
Additionally, MAN expressed concern over the lack of implementation of the proposed ₦1 trillion Manufacturing Stabilisation Fund, which has been part of the Federal Government’s Accelerated Stabilisation and Advancement Plan since 2024.
The situation has been further complicated by the Central Bank’s suspension of new applications for its development finance programs, including the Real Sector Support Fund (RSSF), which previously offered manufacturers access to concessionary single-digit financing.
“The withdrawal of these interventions has forced manufacturers into the commercial lending market, where interest rates exceeding 35% make productive borrowing nearly impossible,” Ajayi-Kadir said.
MAN warned that the ongoing contraction in manufacturing credit could depress capacity utilization, limit the sector’s contribution to Gross Domestic Product (GDP), trigger workforce reductions, and intensify inflationary pressures due to constrained domestic production.
The association also cautioned that a decline in manufacturing output could increase demand for imports, adding pressure on foreign exchange reserves and undermining broader economic diversification initiatives.
According to MAN, the issue is not a scarcity of capital within the economy but a structural failure in how development finance is allocated to productive sectors. The association criticized the practice of channeling industrial intervention funds through conventional commercial banking systems, which prioritize short-term gains and impose rigid collateral requirements, thereby diminishing their potential developmental impact.
To address these challenges, MAN called for a comprehensive restructuring of Nigeria’s industrial financing framework. It urged policymakers to separate developmental credit from traditional banking constraints and to establish financing mechanisms tailored to support long-term industrial growth.
The association concluded that without prompt reforms to enhance access to affordable credit, Nigeria risks stagnating in its industrialization efforts, thereby limiting the transformative potential of the Nigeria Industrial Policy 2025.
