Banks Cut Loans to Manufacturers by 26%, Lending Drops to ₦8 Trillion Amid Soaring Interest Rates…Nigeria’s manufacturing sector is facing renewed financial pressure as commercial banks have significantly reduced their lending to the industry, cutting credit by approximately 26% to ₦8 trillion.
This marks the steepest quarterly decline in over two years and raises fresh concerns about the sustainability of local manufacturing under tightening monetary conditions.
Recent figures from the Central Bank of Nigeria (CBN) show that total credit extended to manufacturers fell from ₦9.29 trillion in the second quarter of 2024 to ₦8.67 trillion by the end of the third quarter.
This represents a 6.67% drop within three months and a sharp reversal from the growth trend observed since late 2022.
By comparison, lending to the sector had steadily increased from ₦8.70 trillion in the first quarter of 2024 to its peak in the second quarter, before the latest downturn set in.
Industry experts and financial analysts largely attribute this credit contraction to the CBN’s aggressive monetary tightening, which has driven lending rates to unprecedented levels.
Since April 2022, the CBN has hiked its Monetary Policy Rate (MPR) from 11.5% to the current 27.5% in a bid to curb inflation and stabilize the naira.
This sustained increase in benchmark rates has pushed commercial banks to adjust their own lending rates sharply upward, making credit much more expensive for businesses.
According to the Manufacturers Association of Nigeria (MAN), the average interest rate on loans to manufacturers now hovers around 31%, with some facilities attracting rates as high as 35%.
These borrowing costs, the highest seen in recent years, have forced many manufacturers to scale back their borrowing plans, postpone expansion projects, or seek alternative sources of funding.
Manufacturers who had previously relied on bank loans to finance working capital, upgrade equipment, or expand operations are now finding it increasingly difficult to access affordable credit.
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Many are being priced out of the lending market altogether, and this, according to analysts, could have far-reaching consequences for industrial growth, job creation, and the broader economy.
Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), warned that the current credit squeeze could severely undermine the manufacturing sector’s ability to sustain production and competitiveness.
He emphasized that the combination of high borrowing costs and weak consumer demand is creating a perfect storm for manufacturers, many of whom are already struggling with inflationary pressures, foreign exchange volatility, and poor infrastructure.
“The aggressive interest rate hikes, though understandable from a monetary policy standpoint, are dealing a heavy blow to the productive sectors of the economy, particularly manufacturing,” Yusuf said.
“If this trend continues, we risk stalling the little industrial progress we’ve made over the past few years.”
The latest lending figures highlight the growing disconnect between Nigeria’s monetary policy and the practical realities facing manufacturers.
Despite the CBN’s intention to control inflation, the high cost of credit is now making it harder for manufacturers to contribute meaningfully to economic growth.
MAN has repeatedly called on the government and the apex bank to consider policies that will ease credit access for the sector, including concessional lending windows, targeted intervention funds, and lower interest rate regimes for key industries.
In its recent reports, MAN stressed that access to affordable finance remains one of the most critical challenges facing local manufacturers, alongside other persistent issues such as unreliable electricity supply, rising energy costs, multiple taxes, and regulatory bottlenecks.
The fallout from reduced lending is already becoming visible.
Several manufacturers have reported scaling down production, deferring capacity expansion, and cutting jobs to manage rising costs.
Industry insiders fear that unless borrowing costs become more manageable, the situation could escalate into factory closures and increased reliance on imports, which would further weaken the naira and exacerbate Nigeria’s trade imbalance.
Commercial banks, for their part, appear cautious about expanding credit exposure to the sector amid current macroeconomic uncertainties.
With high default risks and limited profit margins, many banks are reportedly redirecting their lending focus to less risky segments, including government securities and established corporate clients with stronger balance sheets.
Looking ahead, manufacturers and business groups are urging policymakers to strike a better balance between controlling inflation and supporting the real sector.
Without a shift in monetary strategy or the introduction of sector-specific credit interventions, the manufacturing industry may find it difficult to recover from the present financial squeeze.
As the CBN maintains its hawkish stance to stabilize the economy, manufacturers remain hopeful that government-led initiatives can provide some relief, either through fiscal support or targeted funding programs.
Until then, the sector is likely to continue grappling with constrained access to credit, rising production costs, and the risk of eroding competitiveness both at home and abroad.
