High Interest Rates Hurting Industry, MAN Warns CBN

Segun Ajayi-Kadir, Director General of MAN

The Manufacturers Association of Nigeria (MAN) has expressed deep concern over the Central Bank of Nigeria’s decision to maintain its contractionary monetary stance following the 301st meeting of the Monetary Policy Committee (MPC) held on July 21–22, 2025. While the apex bank retained the Monetary Policy Rate (MPR) at 27.5% in a bid to rein in inflation, MAN warns that the policy continues to choke the real sector and threatens to derail any prospects of industrial revival.

Segun Ajayi-Kadir, Director General of MAN, said the decision underscores a troubling continuity of policy rigidity at a time when manufacturers are in desperate need of relief.

Inflation Slows, But Food Prices Climb

The MPC noted a slight drop in headline inflation from 22.97% in May to 22.22% in June 2025, but the committee flagged concern over the rise in food inflation from 21.14% to 21.97% within the same period—signaling persistent pressures on household consumption and agricultural supply chains.

Despite these mixed indicators, the MPC held firm on key monetary parameters, including the asymmetric corridor around the MPR at +500/-100 basis points, Cash Reserve Ratio (CRR) at 50% for Deposit Money Banks (DMBs), 16% for Merchant Banks, and a Liquidity Ratio of 30%.

Manufacturers Cry Out: Borrowing Costs Are Stifling Growth

Ajayi-Kadir said the retention of a 27.5% MPR translates to an average lending rate of over 35% for manufacturers—making access to capital virtually impossible for many firms. He lamented that the same high rates adopted months earlier have deepened the cost of doing business, distorted production schedules, and undermined competitiveness.

“In 2024 alone, capacity utilization plunged to 57%, while inventory of unsold goods more than doubled—rising from ₦1.14 trillion in 2023 to ₦2.14 trillion. These are not just figures; they are the real consequences of policy disconnect,” he stated.

Ajayi-Kadir noted that the ripple effect of high interest rates has dampened investor confidence, increased the cost of finished goods, and threatened the viability of countless industrial players.

MAN’s Plea: Cut Rates, Support Real Sector Revival

While acknowledging the CBN’s effort to stabilize the macroeconomic environment, MAN insisted that price stability alone is not enough to reposition the economy.

“Inflation is not just a monetary phenomenon—it’s structural. The manufacturing and agricultural sectors need coordinated fiscal and monetary support to thrive,” Ajayi-Kadir said.

MAN recommended the following urgent interventions:

Reduce interest rates in subsequent MPC meetings to lower borrowing costs and encourage private sector investment.

Implement a Nigeria First Policy to promote local patronage and incentivize backward integration, thereby reducing dollar demand.

Tackle insecurity in farming communities to stabilize food production and reduce food inflation.

Promote income redistribution and inclusive growth to stimulate demand and improve overall economic welfare.

A Call for Urgent Policy Rethink

As inflation remains stubborn and production costs soar, Nigeria’s industrial base continues to suffer under the weight of tight monetary policy. For manufacturers already grappling with power shortages, foreign exchange scarcity, and insecurity, the decision to keep interest rates high feels like a missed opportunity to trigger economic recovery.

Ajayi-Kadir emphasized, “Now more than ever, Nigeria needs bold, coordinated policy reforms that place the real sector at the center of national development.”

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