2
LAGOS – The Manufacturers Association of Nigeria (MAN) has called on the Central Bank of Nigeria (CBN) to reduce interest rates charged on borrowing in order to assist manufacturers to access funds to expand their production capacity.
The association also appreciated the decision of the Monetary Policy Committee (MPC) of the CBN to halt the increase in the Monetary Policy Rate (MPR) and to maintain the 27.00 percent fixed at its last meeting. The association stated that the decision to adjust the standing facilities corridor to enhance liquidity was also noted. However, it said that the expectation of the association is a further reduction in the rate to reduce the cost of borrowing for manufacturers.
But the association stated that despite the reduction at the last meeting, “borrowing costs of 30 to 37 percent remain high for manufacturers. The rate hinders production and reduces the competitiveness of the sector. The emphasis on exchange rate stability and improved forex liquidity is vital, as manufacturers rely on foreign exchange for imports, but it is essential to reduce the cost of funds to encourage borrowing for expansion and investment.”
MAN argued that persistent high lending rates will further limit access to affordable credit for manufacturers, especially those within the Small and Industries (ISMI) cadre. It added that “the 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 urged 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 association urged the CBN to strengthen cooperation with fiscal authority to promote reforms capable of unlocking the full potential of the manufacturing sector.
In consideration of the current economic conditions, MAN said that the decisions of the MPC, and the need for the sector to fully leverage on the emerging macroeconomic stability for productive growth, the association hereby recommends that the Central Bank should adopt a downward review of the rate in the subsequent MPC meetings to lessen the burden of high borrowing costs and incentivize long-term investments in manufacturing, particularly in capital-intensive sub-sectors.
It called on the CBN to consider additional policy instruments or incentives that facilitate credit flow to the real sector of the economy, especially the manufacturing sector.
The association urged the government to strengthen fiscal discipline while upscaling investment in infrastructure like roads, power and logistics to boost the supply capacity of the sector.
MAN charged the Federal Government to collaborate closely with CBN to stabilize the naira and manage external risks by monitoring the potential risk of capital flights because of the MPC’s corridor review that will push banks to lend more.
It tasked the government to implement complementary fiscal measures that support industrial development and promote structural reforms especially in real sectors of the economy including agricultural, manufacturing and energy sectors to further reduce inflationary pressure.
The government, it added, should resolve the lingering spate of insecurity in the country, especially in agricultural and industrial zones to stabilize food supply and raw material inputs, adding that a secure environment is critical to food security, lower inflation rate and sustained industrial growth in both urban and rural areas.
MAN urges the CBN to monitor and evaluate the impacts of previous MPC decisions on credit access to the real sector to aid informed position at subsequent meetings
The Manufacturers Association of Nigeria reiterates its appreciation of the CBN’s efforts to stabilize the economy and ease inflationary pressures. It said that the decision to adjust the MPC’s corridor is a way to encourage banks to lend rather than hoarding liquidity.
However, stated that it is essential for the government to seize the opportunity to promote credit-led growth, especially in productive sectors, while managing risks through fiscal discipline and structural reforms.
It called for stronger coordination between fiscal and monetary authorities to ensure the positive impact of the MPC decision on the manufacturing sector, the economy and sustainable development.
