Key Takeaways
- Nigeria's manufacturing sector faces high credit costs and rising production expenses
- Manufacturers identify limited access to finance as primary challenge, with high commercial bank lending rates as a disincentive to productivity
- Central Bank of Nigeria's Monetary Policy Rate remains too high to support the real sector's financing needs
The Manufacturers Association of Nigeria (MAN) has released its Manufacturers' CEOs Confidence Index (MCCI) for the second quarter of 2026, revealing that despite a renewed improvement in manufacturers' confidence in the economy, the high cost of credit and rising production expenses remain major threats to the recovery of the manufacturing sector.
According to the report, two in every three executives cited commercial bank lending rates as a major disincentive to manufacturing productivity, with the volume of credit available to the sector described as inadequate. The high-interest-rate regime has increased the cost of credit and, by extension, production costs, weakening manufacturers' ability to expand output, invest, and create jobs.
Challenges Facing Manufacturers
Manufacturers also face challenges such as frequent power outages, inadequate foreign exchange supply, high production costs, shortages of raw materials, multiple taxation, and inadequate government infrastructure. Despite reforms in the foreign exchange market and relative stability in the naira, about half of the manufacturers surveyed said improvements in foreign exchange sourcing had not translated into sufficient access to foreign exchange for their operations.
Impact on Manufacturing Activity
The situation continues to limit manufacturers' ability to operate at full capacity, while also raising the cost of imported inputs and machinery. Only 27 per cent of manufacturing executives considered government expenditure on infrastructure encouraging for manufacturing activity, reflecting concerns over the slow impact of public infrastructure investments on productivity.
Why This Matters
Reducing financing and production costs is critical to converting the renewed confidence among manufacturers into actual increases in output, investment, and employment. The Director General of MAN, Segun Ajayi-Kadir, called on the Central Bank of Nigeria to reduce the Monetary Policy Rate to below 20 per cent to unlock manufacturing growth and improve access to affordable credit, emphasizing that this is crucial for the sector's recovery and growth.