Persistently high borrowing costs are emerging as one of the biggest threats to industrial expansion, with manufacturers warning that expensive credit is slowing investment, weakening productivity and constraining economic diversification.Â
The Manufacturers Association of Nigeria (MAN) said access to affordable financing has become the single biggest obstacle confronting manufacturers, with commercial lending rates remaining prohibitively expensive despite the recent moderation in the Central Bank of Nigeria’s benchmark interest rate.
According to the association’s Second Quarter 2026 Manufacturers CEOs Confidence Index (MCCI), industrial firms are increasingly being forced to operate without affordable bank credit while simultaneously financing critical infrastructure that would ordinarily be provided by the public sector.
Segun Ajayi-Kadir, the director general of MAN said the Central Bank’s tight monetary policy has significantly increased the cost of credit, making expansion and working capital financing difficult for manufacturers.
He noted that although the Monetary Policy Rate (MPR) has been reduced to 26.5 per cent, it remains among the highest policy rates in Africa, while commercial lending rates continue to rise well above the benchmark, effectively excluding many manufacturers from accessing productive credit.
According to him, manufacturing requires long-term, affordable financing to expand production capacity, modernise equipment and improve competitiveness, objectives that are becoming increasingly difficult under the prevailing interest rate environment.
Industry operators say the financing challenge is compounded by the rising cost of self-provision.
Rather than concentrating resources on production, many manufacturers continue to invest heavily in electricity generation, transportation networks, security services, road maintenance and foreign exchange sourcing because of persistent deficiencies in public infrastructure.
The association said these additional operating costs are steadily eroding profit margins, limiting capacity utilisation and discouraging fresh investment in the sector.
Despite increased public expenditure on infrastructure, manufacturers said they are yet to experience meaningful improvements in their operating environment.
According to the report, the expected spillover benefits from government infrastructure projects have not translated into lower operating costs for factories, leaving businesses to continue funding essential services independently.
Manufacturers also identified access to foreign exchange as a major operational challenge, noting that companies importing industrial machinery, production equipment and raw materials still incur significant costs sourcing foreign currency through the market.
The cumulative effect, MAN said, is reduced industrial productivity at a time when Nigeria is seeking to strengthen domestic manufacturing under its broader economic diversification agenda.
The association warned that recent policy initiatives, including the Nigeria Tax Act 2025 and the Nigeria First Policy, may struggle to achieve their intended impact if financing costs remain elevated and infrastructure deficiencies persist.
To improve the operating environment, MAN urged the Central Bank to introduce lower-cost financing for manufacturers by reducing lending rates on industrial loans to below 20 per cent, arguing that affordable credit is essential for expanding production and creating jobs.
The association also called for priority foreign exchange allocation for manufacturers importing industrial inputs and machinery to reduce production disruptions.
Beyond monetary policy, MAN urged Ministries, Departments and Agencies (MDAs) to strengthen implementation of Executive Orders 003 and 005, which encourage public institutions to prioritise locally manufactured goods in government procurement.
It further called on electricity distribution companies to prioritise power supply to industrial clusters while encouraging greater government support for factories investing in alternative energy solutions such as natural gas and solar power.
