Nigeria’s manufacturing sector is facing one of its most severe financing crises in recent years following a sharp decline in commercial bank credit to manufacturers, a development that industry stakeholders warn could undermine industrial growth, worsen unemployment and weaken the country’s economic diversification agenda.
The alarm was raised by the Director-General of the Manufacturers Association of Nigeria, Segun Ajayi-Kadir, who described the development as clear evidence of the “severe financial constraints” currently confronting manufacturers across the country.
According to data released by MAN, commercial bank credit to the manufacturing sector declined from ₦8.53 trillion in December 2024 to ₦6.61 trillion in December 2025, representing a contraction of ₦1.92 trillion or 22.5 percent year-on-year.
The association noted that manufacturing recorded one of the highest contractions in credit allocation among major sectors of the economy, surpassed only by the General Services sector, which experienced a 25 percent decline.
The development comes at a time when manufacturers are already grappling with rising production costs, foreign exchange volatility, high energy expenses, weak consumer purchasing power and inflationary pressures.
Manufacturing Losing Ground to Finance and Oil Sectors
Analysis of the banking sector’s credit allocation pattern shows that manufacturing now trails significantly behind sectors such as Oil and Gas and Finance.
While manufacturing received ₦6.61 trillion in credit as of December 2025, the Oil and Gas sector attracted ₦10.59 trillion, while the Finance sector received ₦9.24 trillion.
MAN argued that the figures reveal a troubling preference for speculative and rent-driven sectors rather than productive industries that create jobs, boost exports and support industrial development.
According to Ajayi-Kadir, the trend raises serious concerns about the country’s commitment to building a production-driven economy.
“The steep contraction in manufacturing credit demonstrates a systemic preference for speculative activities over productive investments that generate employment and economic value,” he stated.
Nigeria Falling Behind Emerging Industrial Economies
The association further compared Nigeria’s manufacturing financing environment with those of emerging industrial economies.
MAN noted that while Nigerian manufacturers suffered a 22.5 percent decline in access to bank credit, countries such as India and Vietnam were deliberately expanding industrial financing to accelerate manufacturing growth.
In India, industrial credit reportedly grew by about 9.6 percent year-on-year in late 2025 as part of a broader industrial expansion strategy, while Vietnam pursued aggressive credit growth targets estimated between 19 and 20 percent to support manufacturing and processing industries.
Industry observers say these countries have increasingly leveraged affordable financing to attract investments, expand exports and build globally competitive manufacturing ecosystems.
High Interest Rates Remain Biggest Obstacle
At the centre of the crisis, according to MAN, is the prohibitive cost of borrowing.
Although the Central Bank of Nigeria has made modest adjustments to monetary policy, including reducing the Monetary Policy Rate (MPR) to 26.5 percent, commercial lending rates remain extremely high.
The association disclosed that manufacturers continue to face average prime lending rates of about 27 percent and maximum lending rates exceeding 35 percent.
Such rates, industry experts argue, make long-term industrial investments financially unsustainable.
Manufacturers seeking to acquire machinery, expand production facilities, modernize factories or increase capacity utilization are often unable to justify borrowing at such expensive rates.
For many businesses, debt servicing alone consumes a significant portion of operating revenue.
Cash Reserve Requirements Limiting Bank Lending
MAN also blamed the stringent Cash Reserve Ratio (CRR) policy maintained by the Central Bank for restricting liquidity within the banking system.
The CRR, estimated between 45 and 50 percent, requires banks to hold substantial portions of customer deposits with the apex bank, limiting funds available for lending.
The association argued that the policy, while aimed at controlling inflation and excess liquidity, has inadvertently constrained access to productive sector financing.
Commercial banks, faced with limited lending resources and rising risks, have become increasingly selective in extending loans, particularly to manufacturers operating in a challenging economic environment.
Risk Aversion Deepening Credit Crisis
Beyond liquidity constraints, manufacturers say commercial banks have become highly risk-averse.
MAN explained that many government-backed intervention programmes rely on banks as Participating Financial Institutions (PFIs).
While development funds may be provided at concessional rates, banks still bear the credit risk.
As a result, lenders often impose strict collateral requirements, equity contributions and extensive documentation demands.
According to MAN, this has effectively excluded many genuine manufacturers, particularly small and medium-scale industrial operators, from accessing intervention funds.
Consequently, only large corporations with strong balance sheets and substantial collateral assets are able to benefit.
₦1 Trillion Manufacturing Stabilisation Fund Yet to Materialise
A major source of frustration for manufacturers is the continued delay in implementing the proposed ₦1 trillion Manufacturing Stabilisation Fund.
The fund was announced under the government’s Accelerated Stabilisation and Advancement Plan (ASAP) as a key intervention designed to cushion the impact of economic reforms and provide affordable financing to manufacturers.
However, two years after its announcement, the fund remains largely unimplemented.
MAN expressed concern that the delay has left manufacturers exposed to harsh market realities without the promised financial support.
Industry operators argue that many firms have been forced to scale down operations, postpone expansion plans or shut down entirely while waiting for the intervention.
CBN’s Exit from Direct Development Financing
The association also linked the decline in manufacturing credit to the Central Bank’s decision to halt direct development finance interventions.
Under previous intervention frameworks, manufacturers could access concessionary funding through initiatives such as the Real Sector Support Facility (RSSF).
The suspension of new applications under such schemes has significantly reduced access to single-digit financing.
Manufacturers now depend largely on commercial lending windows where borrowing costs can exceed 35 percent.
According to MAN, the policy shift has unintentionally starved the productive sector of capital while encouraging financial institutions to redirect resources toward short-term and less risky investments.
Five Major Economic Consequences
The Manufacturers Association warned that the credit squeeze could trigger severe consequences across the broader economy.
1. Reduced Capacity Utilisation
Limited access to affordable financing is expected to suppress factory output and prevent manufacturers from investing in technology upgrades, equipment replacement and production expansion.
2. Weak Contribution to GDP
Nigeria’s manufacturing contribution to Gross Domestic Product remains below 10 percent, currently estimated at around 9.57 percent.
Industry leaders fear that shrinking credit access could further weaken the sector’s economic contribution.
3. Rising Unemployment
Manufacturers struggling with cash flow challenges may resort to workforce reductions, operational restructuring or outright closure, leading to job losses across the value chain.
4. Higher Inflation and FX Pressure
Lower domestic production could increase dependence on imports, placing additional pressure on foreign exchange demand and contributing to inflation.
Industry experts argue that insufficient local production often translates into higher consumer prices and greater vulnerability to external shocks.
5. Threat to Nigeria’s Industrial Policy
MAN warned that the implementation of the 2025 Nigeria Industrial Policy could be severely undermined if financing constraints persist.
The policy aims to drive industrialisation, create jobs and boost competitiveness, but stakeholders say these goals cannot be achieved without accessible and affordable capital.
MAN’s Recommendations
To reverse the trend and support industrial growth, the association outlined several policy recommendations.
Among them are:
Reduction of benchmark interest rates by an additional 200 to 300 basis points.
Introduction of incentives for banks that lend significantly to manufacturers at single-digit interest rates.
Expansion of the capital base of the Bank of Industry.
Refinancing of existing manufacturing loans at concessionary rates between 7 and 9 percent.
Introduction of government-backed credit guarantees covering up to 50 percent of loans granted to Small and Medium Industries.
Immediate implementation of the ₦1 trillion Manufacturing Stabilisation Fund.
Transfer of management of the fund to the Bank of Industry with a capped interest rate structure and accelerated processing timelines.
Call for Urgent Policy Action
Ajayi-Kadir stressed that Nigeria’s manufacturing challenges are not caused by a lack of capital within the economy but by structural weaknesses in how credit is distributed.
He argued that developmental financing delivered through conventional commercial banking channels often fails to reach intended beneficiaries because of stringent lending conditions and excessive risk aversion.
The MAN Director-General urged government authorities to establish transparent and efficient financing mechanisms capable of delivering affordable credit directly to manufacturers.
He also called for an urgent audit of the manufacturing sector to assess the impact of recent economic reforms and identify practical measures needed to restore competitiveness.
According to him, Nigeria cannot achieve meaningful industrialisation, sustainable economic diversification or large-scale job creation while manufacturers remain starved of affordable capital.
“The ambition of transforming Nigeria into a globally competitive manufacturing powerhouse will remain elusive unless policy promises are translated into accessible financing that reaches the factory floor,” he concluded.
The Manufacturers Association of Nigeria says bank credit to manufacturers dropped by ₦1.92 trillion in one year, warning that high interest rates, policy delays and funding constraints threaten industrial growth, jobs and economic diversification.
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