MAN to CBN: High Interest Rate Crippling Manufacturing in Nigeria, Cut to Spur Growth

The Manufacturers Association of Nigeria (MAN) is urging the Central Bank of Nigeria (CBN) to immediately review its monetary policy stance and slash interest rates, warning that the prevailing tight monetary policy is crippling Nigeria’s real sector, especially manufacturing and agriculture.

The call came in reaction to the CBN’s Monetary Policy Committee (MPC) decision at its 301st meeting held July 21–22, 2025, where it voted unanimously to retain the Monetary Policy Rate (MPR) at a record-high 27.5% for the second consecutive time this year.

While the CBN argues that the rate retention is part of a broader plan to sustain the disinflationary momentum, MAN contends the policy has yielded little benefit for producers. In a statement, the association described the CBN’s contractionary stance as a chokehold on manufacturing and real-sector productivity.

Lending rates to manufacturers now exceed 35%, MAN revealed, noting that many operators are now either closing shop, cutting production, or relocating. The association said the consequences are evident in surging production costs, lower capacity utilization, reduced output, widespread layoffs, and rising prices of finished goods.

In 2024, the average capacity utilization of the manufacturing sector fell to 57%, down from 59% the previous year. Worse still, unsold finished goods more than doubled year-on-year, jumping to N2.14 trillion in 2024 from N1.14 trillion in 2023.

MAN said this drastic surge is driven by declining consumer purchasing power, high interest on working capital, and the surging cost of imported inputs, all exacerbated by the steep naira depreciation and forex volatility.

“The expectation of MAN is to have a rate cut that is supported by a robust fiscal policy framework capable of facilitating improved access to long-term loans, enhanced productivity, and sustained economic growth,” the group said. It added that the present policy mix is skewed against production and investment.

Although Nigeria’s inflation rate fell marginally to 22.22% in June 2025 from 22.97% in May, food inflation remains stubbornly high and continues to climb. Experts say inflationary pressures have become structural, with major drivers such as insecurity, high logistics costs, naira volatility, and multiple taxes far beyond the reach of interest rate adjustments.

While manufacturers are the loudest voices, they are not alone. Agribusiness operators, particularly in food processing and commodity value chains, are equally suffocated by high borrowing costs and insecurity in production zones. With bank lending shrinking and microfinance institutions offering loans at 45% and above, many small businesses now rely on cooperative societies or shut down altogether.

MAN’s Policy Prescription

To reverse the trend, MAN rolled out a number of policy recommendations:

• Interest Rate Cut: MAN says the CBN must urgently slash the MPR to reduce the cost of credit, especially to critical sectors like manufacturing, agriculture, and energy.
• Nigeria First Policy: The group wants the government to adopt protectionist industrial policies that prioritize local content, encourage backward integration, and promote local patronage of Nigerian-made goods.
• Boost Agricultural Output: It urged the federal government to tackle insecurity in farming regions and fix logistics bottlenecks in agricultural supply chains. These, it said, will help reduce food inflation and raw material costs for agro-allied industries.
• Stimulate Consumption Through Income Redistribution: MAN emphasized that raising minimum wages, removing excessive taxes, and funding social protection programs could enhance consumer demand, which would in turn stimulate industrial output.

Backstory: MPC Standing Firm

At the last MPC meeting, CBN Governor Olayemi Cardoso said the decision to hold the rate steady was to maintain the momentum of disinflation, noting that the bank’s policies were beginning to show results. The slowdown in the inflation rate is an encouraging sign, he said.

However, analysts believe the marginal drop in headline inflation is not enough reason to maintain a policy that is clearly stifling production, discouraging investment, and worsening unemployment.

All 12 members of the committee voted to retain the rate, signaling a firm consensus in the apex bank to prioritize inflation control over growth stimulation—a move that MAN and other stakeholders fear could prolong Nigeria’s economic stagnation.

Some economists, including those at the Lagos-based Financial Derivatives Company, argue that the CBN should have started easing by now, especially after six months of aggressive hikes earlier in the year. They warn that keeping rates high could deepen the recession risk, especially with GDP growth at a slow pace and business confidence at a historic low.

Others support the CBN’s cautious approach, noting that a premature rate cut could weaken the naira further and reverse recent gains in foreign capital inflows.