Reported by Ariajegbe Sylvia Esezobor
The Manufacturers Association of Nigeria has welcomed the Central Bank of Nigeria’s decision to slash the Monetary Policy Rate by 350 basis points to 23 per cent, but warned that the cut will mean little for struggling factories unless banks actually pass it on through cheaper loans.
In a statement released on Wednesday, the Director-General of MAN, Segun Ajayi-Kadir, described the reduction as a positive development and a gradual shift away from the tight monetary conditions that have squeezed manufacturers for more than two years. He said lower interest rates would strengthen the ability of manufacturers to finance inventories, raw materials, production cycles, equipment purchases and business expansion. But he was blunt about the gap between policy announcements and real-world lending. Even at 23 per cent, he warned, prime lending rates would still hover between 27 and 30 per cent. “No manufacturer anywhere in the world can be competitive borrowing at 30 per cent,” he said.
The CBN’s decision came on Tuesday at the end of its 307th Monetary Policy Committee meeting, where Governor Olayemi Cardoso announced the largest single rate cut in nearly two decades. The MPR was reduced from 26.5 per cent to 23 per cent, and the asymmetric corridor around the benchmark rate was narrowed from +50 and -450 basis points to +50 and -300 basis points. The MPC said its decision reflected easing inflationary pressure and concerns that market interest rates had diverged from the policy rate, blunting the effectiveness of monetary policy. Nigeria’s headline inflation slowed to 15.39 per cent in August from 15.43 per cent in July, the lowest reading in years and a dramatic retreat from the 23.14 per cent recorded in August 2025.
Yet for manufacturers, the celebration was tempered by a hard reality. The CBN’s Cash Reserve Ratio remains at 45 per cent for deposit money banks and 16 per cent for merchant banks, a policy designed to mop up excess liquidity but which also locks away a significant share of bank deposits that could otherwise fund productive lending. Ajayi-Kadir said the high CRR meant a substantial proportion of deposits remained unavailable to businesses, and warned that the benefits of the MPR reduction may not be fully realised if credit expansion to the real sector remains constrained. MAN called for a progressive review of the CRR when macroeconomic conditions permit, and urged the CBN to expand access to concessionary single-digit financing for manufacturers.
The association’s concerns are backed by hard data. According to a MAN report released in July, manufacturers’ cost of borrowing as of May 2026 averaged 27.45 per cent in prime lending rates and 35.65 per cent in maximum lending rates across major commercial banks. Some manufacturers have faced rates as high as 60 per cent, according to CBN data published earlier this year. For pharmaceutical companies and other capital-intensive manufacturers, loans at 33 per cent make break-even almost impossible. The consequence has been a steady decline in bank credit to the manufacturing sector, which fell by N1.92 trillion from N8.53 trillion in December 2024 to N6.61 trillion in December 2025. Manufacturers have warned that unless credit becomes cheaper and more accessible, production will continue to stagnate, jobs will be lost, and the much-touted industrialisation agenda will remain a slogan.
The manufacturing sector has shown flickers of recovery. The Manufacturers’ CEOs Confidence Index rose to 52.1 points in the second quarter of 2026 from 48.7 in the first quarter, its highest level in more than two years. The index measures the pulse of the sector, and a reading above 50 indicates positive sentiment. But even that recovery has been fragile, clouded by high borrowing costs, erratic power supply, foreign exchange volatility and infrastructure deficits. Manufacturers have consistently argued that no economy can industrialise when businesses borrow at rates that exceed their profit margins. At 23 per cent MPR, the policy rate is still higher than the inflation rate of 15.39 per cent, meaning borrowers face a real interest rate of nearly eight percentage points, a punishing burden for any enterprise.
The Centre for the Promotion of Private Enterprise echoed MAN’s call, urging banks to progressively reduce lending rates on new and existing facilities. Its chief executive, Muda Yusuf, said the rate cut could reduce the cost of capital, improve business cash flows and stimulate investment, particularly in manufacturing, agriculture, construction and logistics. But he too cautioned that the impact would depend on effective transmission, and that sustained moderation in interest rates would lower the Federal Government’s domestic borrowing costs and ease its debt-service burden. He warned that the rate cut could affect interest-rate differentials and the attractiveness of naira assets, potentially creating portfolio-flow and exchange-rate risks, and urged the CBN to remain vigilant and deploy open-market operations when necessary to manage volatility.
MAN’s message to the CBN and the banks is straightforward. The rate cut is welcome, but it is only a beginning. The association wants stronger coordination between monetary and fiscal authorities to complement easing with measures addressing structural constraints such as electricity, logistics, infrastructure and insecurity. It wants expanded access to single-digit concessionary financing for manufacturers, a progressive review of the CRR, and a commitment from banks that the 350-basis-point reduction translates into real reductions in the rates businesses pay. Ajayi-Kadir said future MPC decisions should be guided by their impact on the manufacturing and productive sectors, with the broader objective of increasing productivity, investment, industrialisation and employment.
For Nigerian manufacturers, Tuesday’s rate cut is a reason to hope but not yet a reason to celebrate. The CBN has signalled that it is willing to ease, and the inflation trajectory suggests there is room to ease further. But the gap between a 23 per cent policy rate and a 30 per cent commercial lending rate is not a technical detail. It is the difference between a factory that can expand and hire, and one that shuts its gates. Until that gap closes, MAN’s welcome will remain conditional, and Nigeria’s industrial ambitions will remain out of reach.
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