The Manufacturers Association of Nigeria (MAN) has said that the decision of the Central Bank of Nigeria (CBN) to maintain the Monetary Policy Rate (MPR) at 27 per cent is unfavourable.
According to the association, the current lending rate at 30-37 per cent has continued to undermine production and erode competitiveness in the sector.
MAN said in a statement on Wednesday that the cost of borrowing remains the biggest constraint facing factories across the country.
It noted that while the CBN’s emphasis on exchange rate stability and improved forex liquidity is vital, as manufacturers rely on foreign exchange for imports, “it is also essential to reduce the cost of funds to encourage borrowing for expansion and investment.”
While commending the CBN for holding the MPR at 27 per cent, the group said what it expected was a further reduction.
“The expectation of the Association is a further reduction in the rate to reduce the cost of borrowing for manufacturers,” MAN stated.
It warned that persistent high lending rates would further limit access to affordable credit for manufacturers, especially those within the SME cadre.
MAN added that the lending rate situation is complicated with prevailing structural challenges like poor infrastructure, high logistics costs, inadequate electricity supply, high energy cost and insecurity that cumulatively raise production costs and weaken competitiveness.
“MAN urges the Central Bank and other policymakers to continue to pursue policies that foster inclusive growth, incentivize manufacturing and address binding constraints limiting the performance of the sector. The CBN should also strengthen handshake with fiscal authority to promote reforms capable of unlocking the full potential of the manufacturing sector,” the statement read in part.
MAN said to unlock the sector’s potential and convert recent macroeconomic gains into real productivity, there needs to be a downward review of the benchmark rate at subsequent MPC meetings; targeted credit interventions to channel funds to capital-intensive manufacturing segments; greater investment in infrastructure to lower the cost of production; closer fiscal-monetary coordination to stabilize the naira and manage external risks; and complementary fiscal reforms in agriculture, manufacturing, and energy to ease inflationary pressures.
Others are urgent action on insecurity, especially in industrial and agricultural zones and monitoring of the impact of past MPC decisions on credit access to the real sector.
