Reported by: Oahimire Omone Precious | Edited by: Oravbiere Osayomore Promise.
Nigeria's manufacturing sector is caught in a perfect storm of soaring credit costs and relentless production expenses that threaten to choke off a fragile recovery, the Manufacturers Association of Nigeria has warned, even as a renewed but precarious optimism flickers among industry leaders. The Manufacturers' CEOs Confidence Index for the second quarter of 2026 rose to 52.1 points from 48.7 in the first quarter, signalling a return to positive sentiment for the first time in two years . But beneath the headline number lies a sector struggling to stay afloat, with two in every three manufacturing executives identifying commercial bank lending rates as a major disincentive to productivity .
The cost of borrowing has reached what MAN describes as exploitative levels. As of May 2026, average prime lending rates stood at approximately 27.45 per cent, while maximum lending rates had climbed to a staggering 35.6 per cent in major commercial banks . With lending rates reportedly exceeding 30 per cent in many cases, long‑term industrial investment has become financially unsustainable . The Manufacturers Association of Nigeria has squarely blamed the Central Bank of Nigeria's Monetary Policy Rate, which stood at 26.5 per cent during the quarter, for pushing borrowing costs to heights that discourage investment and inflate production costs . "The high‑interest‑rate regime has increased the cost of credit and production costs, weakening our ability to expand output, invest and create jobs," industry leaders told MAN .
The credit squeeze has been compounded by a dramatic decline in bank lending to the sector. Commercial bank credit to manufacturers fell by N1.92 trillion between December 2024 and December 2025, dropping from N8.53 trillion to N6.61 trillion . MAN has attributed this contraction to a combination of high borrowing costs, restrictive monetary conditions, and the Central Bank's decision to halt new applications for real‑sector support windows such as the Real Sector Support Fund, which had previously provided manufacturers with access to single‑digit concessionary capital . The suspension of these programmes has forced industrialists into an open market where lending rates soar past 35 per cent .
The relentless rise in production costs has compounded the financing crisis. Manufacturers continue to grapple with frequent power outages, inadequate foreign exchange supply, high energy costs, shortages of raw materials, multiple taxation and inadequate government infrastructure . Despite reforms in the foreign exchange market and relative stability in the naira, about half of the manufacturers surveyed said improvements in foreign exchange sourcing had not translated into sufficient access to foreign exchange for their operations . The situation, they argued, continued to limit their ability to operate at full capacity while raising the cost of imported inputs and machinery . Only 27 per cent of manufacturing executives considered government expenditure on infrastructure encouraging for manufacturing activity, reflecting deep scepticism over the slow impact of public infrastructure investments on productivity .
Yet amid the gloom, manufacturers project brighter days ahead. The MCCI report showed that manufacturers are optimistic about the third quarter, forecasting business conditions at 55.6 points, employment at 55.2 and production conditions at 63 points . However, MAN Director‑General Segun Ajayi‑Kadir has warned that this optimism hinges entirely on government action. He called on the Central Bank to slash the Monetary Policy Rate to below 20 per cent to unlock manufacturing growth, improve access to affordable credit, and give priority allocation of foreign exchange to manufacturers . "Reducing financing and production costs was critical to converting the renewed confidence among manufacturers into actual increases in output, investment and employment," he stressed .
MAN has also renewed its call for the implementation of the N1 trillion Manufacturing Stabilisation Plan, introduced in 2024 but left languishing despite its inclusion in the Accelerated Stabilisation and Advancement Plan . The association argued that the persistent non‑implementation of the fund, combined with the absence of the promised fiscal cushion, has left manufacturers with no option but to navigate the punishing interest rate environment without relief. The association has linked the scaling down of operations by factories, and in some cases outright exits from the business space, to the gap between policy promises and actual disbursement, an implementation deficit that continues to stifle Nigeria's industrial potential .
The Manufacturers Association of Nigeria has also criticised the reliance on commercial banks to act as Participating Financial Institutions for government development funds, arguing that banks impose their risk‑averse commercial criteria on these interventions, requiring collateral and equity contributions that struggling manufacturers cannot afford . The result, according to MAN, is that while funds exist to help struggling manufacturers, they can only be accessed by large companies that are already highly liquid and secure, leaving small and medium‑sized operators to fend for themselves in a hostile credit environment .
As Nigeria's manufacturers grapple with these overlapping crises, the gap between renewed optimism and harsh economic reality has never been wider. The sector, which contributed 9.57 per cent to Nigeria's real Gross Domestic Product in the first quarter of 2026, remains a critical pillar of the economy, but its ability to drive growth, create jobs and expand output hangs in the balance . The manufacturers have made their position clear: without urgent policy intervention to reduce borrowing costs, improve access to credit, and stabilise the operating environment, the fragile recovery they are banking on may never materialise. As MAN has warned, the time for promises is over. The time for action is now.
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