Manufacturers Cut Bank Loans N1.44tn as High Rates Bite

Manufacturers in Nigeria reduced bank borrowing by N1.44 trillion over the first nine months of 2025, as persistently high borrowing costs constrained access to credit, according to the Central Bank of Nigeria’s latest statistical bulletin.

Outstanding bank loans to the manufacturing sector fell from N8.53 trillion in December 2024 to N7.09 trillion by September 2025—a 16.9 per cent contraction. The decline began immediately in January 2025, with credit dropping to N8.31tn, and deepened through the first quarter, shrinking by over N812bn by March. A temporary rise in April and May proved unsustainable, followed by a sharp N729bn fall in June—the steepest monthly drop. Brief increases in July and August were erased by a N336bn decline in September, returning credit to the June low.

The consistent reduction reflects a deliberate deleveraging by manufacturers facing elevated interest rates, weak demand, and rising operational costs. The pattern indicates an inability to sustain higher borrowing levels under current monetary conditions rather than temporary fluctuations.

This credit squeeze occurs against a backdrop of tight monetary policy. The CBN’s Monetary Policy Rate has remained at 27 per cent following aggressive hikes to curb inflation. While banks pay low single-digit rates on deposits, manufacturing prime lending rates range from 30 to 37 per cent, with some lenders charging above 35 per cent. The high cost of funds is attributed to the benchmark rate, risk premiums, and the sector’s perceived risk profile.

Industry groups have voiced concern. The Manufacturers Association of Nigeria (MAN) acknowledged the pause in rate hikes but described current lending rates as “punitive” and damaging to competitiveness. MAN Director-General Segun Ajayi-Kadir stated that rates between 30 and 37 per cent hinder production and investment, calling for a reduction to stimulate expansion. Similarly, the Nigerian Association of Small and Medium Enterprises (NASSME) argued that monetary conditions remain harsh for smaller firms despite improvements in inflation and forex liquidity.

The sustained reduction in manufacturing credit highlights the trade-off between the CBN’s inflation-targeting mandate and the financing needs of the real economy. With borrowing costs anchored at multi-year highs, manufacturers—particularly small and medium enterprises—continue to face constrained access to affordable capital, potentially limiting production and job creation. The sector’s trajectory suggests little relief until interest rates decline, a shift that would require a sustained drop in inflation to justify.