Manufacturers sharply reduced their exposure to bank loans over the first nine months of 2025 as borrowing costs stayed elevated, cutting total credit by N1.44tn amid tight monetary conditions and wide lending spreads, according to the latest quarterly statistical bulletin of the Central Bank of Nigeria.
CBN data on the Deposit Money Banks’ sectoral distribution of credit show that lending to manufacturing stood at N8.53tn in December 2024, before entering a prolonged decline, leaving outstanding credit at N7.09tn by September 2025.
The N1.438tn reduction, equivalent to about 16.9 per cent, reflects a deliberate pullback by manufacturers struggling to cope with high interest rates, weak demand, and rising operating costs.
The contraction began immediately at the start of the year. In January 2025, credit to manufacturing fell to N8.31tn, a decline of about N220bn, or roughly 2.6 per cent, from the December level.
This early drop signalled that manufacturers were already adjusting balance sheets in response to the cost of funds, rather than expanding borrowing at the turn of the year.
The slowdown deepened in February, when credit slipped further to N8.03tn. The N279bn month-on-month reduction, representing about 3.4 per cent, suggested that the initial cutback was not temporary.
By March, the trend persisted, with manufacturing credit declining again to N7.72tn, a further N313bn fall, or nearly four per cent compared with February. Over the first quarter alone, manufacturers had reduced bank borrowing by more than N812bn, showing the intensity of the adjustment.
A brief pause emerged in April, when credit rose to N7.90tn. The N181bn increase, equivalent to about 2.3 per cent, hinted at tentative restocking or short-term financing needs, possibly linked to seasonal production cycles.
However, the rebound proved fragile. In May, credit slipped slightly to N7.82tn, a modest N77bn decline, or around one per cent, showing that the underlying caution remained intact.
The most severe contraction occurred in June, when manufacturing credit dropped sharply to N7.09tn. The N729bn month-on-month fall, amounting to more than nine per cent, marked the steepest single-month reduction in the period under review.
There was a mild recovery in July, with credit edging up to N7.28tn. The N189bn increase, or about 2.7 per cent, suggested that some manufacturers briefly returned to the credit market, possibly to meet short-term working capital needs.
The improvement continued into August, when lending rose further to N7.43tn, a gain of roughly N146bn, or two per cent. Despite the two-month rebound, credit levels remained far below the December 2024 position, highlighting how limited the recovery was.
By September, the pressure resurfaced. Manufacturing credit fell again to N7.09tn, a N336bn decline from August, or about 4.5 per cent, effectively erasing the mid-year gains and returning the sector to its June low.
The pattern shows that, even when credit briefly improved, manufacturers were unable to sustain higher borrowing levels in the face of prevailing financial conditions. In cumulative terms, the data point to a steady deleveraging cycle rather than random volatility.
Month after month, declines outweighed increases, leaving manufacturers with significantly less bank financing than at the end of 2024. The N1.44tn contraction represents a meaningful withdrawal of credit from one of the economy’s most capital-intensive sectors.
The retreat in lending coincides with a period of exceptionally high interest rates. CBN disclosures show that while banks pay around 8.10 per cent on savings deposits and low single-digit rates on demand deposits, lending rates to manufacturers are priced far higher.
Manufacturing prime lending rates at many banks sit in the mid-20 per cent to low-30 per cent range, while maximum rates extend well beyond that, with several lenders charging above 35 per cent and at least one major bank disclosing a ceiling of 60 per cent.
These pricing dynamics are shaped by the broader monetary environment. The CBN’s Monetary Policy Rate, which serves as the benchmark for interest rate conditions in the economy, stood at about 27 per cent over the period, following aggressive tightening aimed at curbing inflation and stabilising the macroeconomic environment.
Although the MPR is not a lending rate, it sets a high base from which banks add risk premiums, operational costs, and sector-specific buffers, particularly for manufacturing, which is often viewed as high-risk.
Manufacturers have repeatedly complained that double-digit lending rates make long-term industrial investment uncompetitive. Financial analysts have noted that sustained increases in the Monetary Policy Rate are adding to the financing cost burden on manufacturers, and that higher loan repayments could increase employment and economic growth.
The Manufacturers Association of Nigeria earlier urged the CBN to reduce interest rates further to ease the rising cost of borrowing, which continues to stifle production and erode competitiveness in the manufacturing sector.
In its reaction to the outcome of the Monetary Policy Committee meeting held on November 24 and 25, MAN stated that it acknowledged the MPC’s decision to retain the Monetary Policy Rate at 27 per cent but stressed that the current lending environment remains “punitive for manufacturers.”
In his statement, Director-General of MAN, Segun Ajayi-Kadir, said the association “appreciates the decision of the MPC to halt the increase in MPR” but insisted that manufacturers had expected “a further reduction in the rate to reduce the cost of borrowing.”
Ajayi-Kadir noted that despite the improvement recorded at the last meeting, manufacturers still contend with borrowing costs “ranging between 30 and 37 per cent,” describing the rates as “high, restrictive, and damaging to competitiveness.”
He said, “The rate hinders production and reduces the competitiveness of the sector. While the emphasis on exchange rate stability and improved forex liquidity is crucial, it is essential to reduce the cost of funds to encourage borrowing for expansion and investment.”
The Association warned that persistent high lending rates would continue to limit manufacturers’ access to affordable credit, particularly those in the small and medium industrial cadre.
Meanwhile, the Director-General of the Nigerian Association of Small and Medium Enterprises, Eke Ubiji, said that the MPC needed to reconsider the rate in light of the sustained decline in inflation. He insisted that borrowing conditions remained harsh for Micro, Small, and Medium-sized Enterprises despite improvements in macroeconomic indicators.
Ubiji said, “The CBN needs to still go around their decision on the MPR and see what could be done. It is still not encouraging borrowing from the private sector.”
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