The Manufacturing Association of Nigeria (MAN) has expressed concerns that the recent interest rate hike by the Central Bank of Nigeria (CBN) will further strain the manufacturing sector. The Association warned that this increase will negatively impact consumer purchasing power, production levels, competitiveness, and sales.
Following the 296th meeting of the Monetary Policy Committee (MPC) on Tuesday, the CBN raised the Monetary Policy Rate (MPR) by 50 basis points, bringing it from 26.25 percent to 26.75 percent. Additionally, the MPC adjusted the asymmetric corridor around the MPR to +500/-100 basis points, maintained the Cash Reserve Ratio (CRR) at 45 percent for deposit money banks and 14 percent for merchant banks, and retained the Liquidity Ratio at 30 percent.
In a statement on Wednesday, MAN’s Director General, Segun Ajayi-Kadir, expressed concern over the continuous increase in MPR, which has seen a significant rise of 1,475 basis points from 11.5 percent in May 2022 to 26.25 percent in May 2024, while inflation has soared to 34.19 percent in June, the highest since March 1996.
Ajayi-Kadir highlighted the critical role of the manufacturing sector in the Nigerian economy but lamented the numerous challenges it faces. He noted that the rising cost of borrowing will increase production costs and the prices of finished goods, exacerbating unemployment and social instability. This situation will also reduce consumer demand, capacity utilization, and profitability.
He further explained that the high borrowing costs will stifle investments, innovation, and opportunities for growth, and limit the sector’s ability to compete globally. If unaddressed, these issues could lead to the distress of more manufacturing businesses.
Ajayi-Kadir also pointed out that only 16 percent of total commercial bank credit was allocated to the manufacturing sector in the first quarter of the year. The increased cost of borrowing will further restrict access to capital needed for expansion, retooling, and technological upgrades.
MAN recognizes the reasons behind the interest rate hike but urges prioritizing the survival of the manufacturing sector. Ajayi-Kadir emphasized the importance of addressing the decline in manufacturing investment and export contributions, as reported by the National Bureau of Statistics. The share of manufactured exports in non-oil exports fell from 21.4 percent in Q4 2023 to 15.1 percent in Q1 2024, reflecting declining investor confidence and sentiment.
News Editor 
Hyelsinta Hassan