Nigerian Manufacturing in Crisis: Credit Access Plunges 22.5%, Sector Pleads for Urgent Policy Rescue

The Nigerian manufacturing sector is facing an existential credit crunch, with commercial bank lending to the industry contracting by a staggering ₦1.92 trillion in just one year, according to an urgent position statement released by the Manufacturers Association of Nigeria (MAN).

Fresh data reveals that credit allocation to manufacturers plummeted from ₦8.53 trillion in December 2024 to ₦6.61 trillion by December 2025—a severe year-on-year contraction of 22.5%. This decline is one of the largest among major economic sectors, leaving manufacturing far behind the oil & gas (₦10.59 trillion) and finance (₦9.24 trillion) sectors, a trend MAN decries as a preference for “speculative and rent-seeking activities over tangible productivity.”

The Roots of the Credit Squeeze

MAN attributes this alarming trend to a “toxic combination” of factors:

Prohibitive Interest Rates: Despite a slight reduction in the Monetary Policy Rate (MPR), manufacturers still face average prime lending rates of 27% and maximum rates soaring to 35.6%, making long-term capital investment financially unviable.

Restrictive Banking Policies: The Central Bank of Nigeria’s (CBN) high Cash Reserve Ratio (CRR) of 45-50% locks away significant banking liquidity. Furthermore, commercial banks, acting as intermediaries for development funds, impose stringent, risk-averse collateral requirements that exclude most genuine manufacturers.

Broken Policy Promises: The association highlights the “persistent non-implementation” of the ₦1 trillion Manufacturing Stabilization Fund, first announced in the 2024 Accelerated Stabilization and Advancement Plan (ASAP), as a critical failure that has left factories without a promised fiscal cushion.

CBN’s Policy Shift: MAN links the credit contraction directly to the CBN’s decision to halt its direct development finance interventions, such as the Real Sector Support Fund (RSSF). This has cut off manufacturers from concessionary single-digit loans, forcing them into a high-interest commercial market while amplifying bank risk aversion.

Dire Consequences for the Economy

MAN warns that this credit starvation has severe macroeconomic implications:

Stifled Production: High borrowing costs block technology upgrades and prevent manufacturers from maintaining optimal capacity utilization.

Stunted Growth: The sector’s contribution to real GDP risks remaining structurally hobbled below 10%, stifling economic diversification.

Job Losses: Factories are pushed into “defensive, structural survival mode,” leading to systematic downsizing and increased unemployment.

Worsening Inflation: A drop in domestic production creates supply shortages, fueling inflation and increasing dependence on expensive imports, which drains foreign exchange reserves.

Policy Paralysis: The credit squeeze threatens to sabotage the execution of the ambitious 2025 Nigeria Industrial Policy (NIP), rendering its targets for job creation and competitiveness “unfunded and unrealizable mandates.”

MAN’s Urgent Demands: A Path Forward

To avert a deeper industrial crisis, MAN has outlined a clear set of demands for monetary and fiscal authorities:

Lower Interest Rates: A reduction of the benchmark interest rate by 200–300 basis points in the next two quarters.

Incentivize Lending: Reduce the CRR for banks that allocate at least 40% of their loan portfolio to manufacturers at single-digit rates.

Empower Development Finance: Significantly increase the capital base of the Bank of Industry (BOI) to meet credit demands directly and expand its intervention fund to allow manufacturers to refinance existing high-interest loans at a fixed 7–9% rate for 10 years.

Implement Guarantees: Operationalize a 50% government-backed guarantee for loans to Small and Medium Industries in value-added processing.

Release the Stabilization Fund: Immediately communicate the status and enforce the release of the long-awaited ₦1 Trillion Manufacturing Stabilization Fund, proposing its management be transferred to BOI with a 9% interest cap and a 7-day processing timeline.

Conclusion: A Call for Structural Decoupling

MAN concludes that the sector’s financial starvation stems from a “fundamental breakdown in policy alignment and distribution architecture.” It argues that using risk-averse commercial banks as channels for developmental funds neutralizes their economic intent.

The association earnestly implores the government to “radically decouple developmental credit from standard commercial banking frameworks” and establish independent, transparent channels to deliver affordable credit directly to manufacturers.

“Until policy promises are structurally insulated from hostile commercial loan criteria and translated into accessible capital,” MAN states, “Nigeria’s ambition to transform into a competitive manufacturing powerhouse will remain permanently stalled.”