Manny Ita
Commercial bank lending to Nigeria’s manufacturing sector declined by ₦2.1 trillion in the most recent fiscal cycle, reflecting mounting pressure on the real sector amid rising borrowing costs and tighter credit conditions. Data show that total credit to manufacturers fell by 16.2 per cent, from ₦13.06 trillion to ₦10.94 trillion, highlighting a sharp pullback by banks from industrial financing.
Industry analysts attribute the decline largely to elevated lending rates, which have risen to as high as 36.6 per cent at some commercial banks. The Manufacturers Association of Nigeria has linked the contraction to what it described as a “hostile macroeconomic environment,” citing high energy costs, weak consumer demand and rising operational risks. According to the association, banks are increasingly shifting funds into government securities rather than extending credit to manufacturers.
The tightening of credit has coincided with growing instability within the sector. Industry reports indicate that 767 manufacturing companies shut down during the last production year. In addition to high interest rates, banks are said to be applying stricter risk assessment standards due to increasing levels of non-performing loans and the demands of the ongoing 2026 bank recapitalisation exercise. Economic researchers noted that “banks are not acting irrationally; they are responding to signals from an environment marked by high inflation and exchange rate volatility,” adding that many lenders now prefer placing excess liquidity with the Central Bank instead of financing factory operations.
The reduced appetite for risk has reportedly resulted in only about 20 per cent of loan applications from manufacturers receiving approval. Analysts say this has further constrained working capital and investment plans across the sector, intensifying concerns about output and employment.
In response, the Manufacturers Association of Nigeria has called for the creation of a Manufacturing Refinancing and Rediscounting Facility to ease funding pressures. The proposed facility would enable banks to provide long-term loans to manufacturers at single-digit interest rates, with tenors of up to seven years. MAN Director-General Segun Ajayi-Kadir said making credit affordable was “essential for a robust manufacturing sector this year,” adding that borrowing costs of between 35 per cent and 36 per cent “stifle growth and innovation.” The association has also urged the Federal Government to disburse a proposed ₦1 trillion stabilisation fund to help manufacturers absorb rising raw material and production costs.
Despite the downturn, some stakeholders remain cautiously optimistic about the outlook for 2026. The Central Bank of Nigeria has projected that inflation could ease to 12.94 per cent by the end of the year, a development that analysts say could create room for a more accommodative monetary policy. Analysts at Cordros Capital noted that the completion of the bank recapitalisation exercise by March 2026 could “support improved credit creation across the industry.”
For many manufacturers, however, short-term survival remains the primary concern. Industry leaders warn that without swift policy measures to lower interest rates and provide targeted financial support, the sector’s contribution to Nigeria’s gross domestic product, currently projected at 10.2 per cent, could face further decline.
