MAN Urges CBN to Reduce Interest Rates to Reinforce Manufacturing Sector

The Manufacturers Association of Nigeria (MAN) has appreciated the decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to halt the increase in MPR and to maintain the 27.00 percent fixed at the last meeting.

MAN noted the decision to adjust the standing facilities corridor to enhance liquidity adding that the expectation of the Association is a further reduction in the rate to reduce the cost of borrowing for manufacturers.

In its position paper on the MPC meeting, MAN noted that despite the CBN’s efforts to stabilise the economy and ease inflationary pressures, the high lending rates of 30-37% remain a significant challenge to manufacturers.

The association emphasised that persistent high lending rates will limit access to affordable credit for manufacturers, especially small and medium-sized enterprises.

“Persistent high lending rates will further limit access to affordable credit for manufacturers, especially those within the SMI cadre. The situation is complicated with prevailing structural challenges like poor infrastructure, high logistics costs, inadequate electricity supply, high energy cost and insecurity that cumulatively raise production costs and weaken competitiveness,” it stated.

MAN urges the Central Bank and other policymakers to continue to pursue policies that foster inclusive growth, incentivize manufacturing and address binding constraints limiting the performance of the sector.

It also urged the CBN to strengthen handshake with fiscal authority to promote reforms capable of unlocking the full potential of the manufacturing sector.

MAN also called on the government to strengthen fiscal discipline, invest in infrastructure, and implement complementary fiscal measures that support industrial development and promote structural reforms.

The association urged the government to resolve the lingering insecurity issues in the country, particularly in agricultural and industrial zones, to stabilise food supply and raw material inputs.

MAN made several recommendations which include: “The Central Bank should adopt a downward review of the rate in the subsequent MPC meetings to lessen the burden of high borrowing costs and incentivize long-term investments in manufacturing, particularly in capital-intensive sub-sectors.

“CBN should consider additional policy instruments or incentives that facilitate credit flow to the real sector of the economy, especially the manufacturing sector

“Government to strengthen fiscal discipline while upscaling investment in infrastructure (Roads, Power and Logistics) to boost the supply capacity of the sector

“The Federal Government should collaborate closely with the Central Bank of Nigeria (CBN) to stabilize the naira and manage external risks by monitoring the potential risk of capital flights because of the MPC’s corridor review that will push banks to lend more

“Government to implement complementary fiscal measures that support industrial development and promote structural reforms especially in real sectors of the economy including Agricultural, Manufacturing and Energy sectors to further reduce inflationary pressure.

“Urgently resolve the lingering spate of insecurity in the country, especially in agricultural and industrial zones to stabilize food supply and raw material inputs. A secure environment is critical to food security, lower inflation rate and sustained industrial growth in both urban and rural areas.

“MAN urges the CBN to Monitor and evaluate the impacts of previous MPC decisions on credit access to the real sector to aid informed position at subsequent meetings.”

The Manufacturers Association of Nigeria reiterated its commitment to working with the CBN and the government to promote economic growth and development, and urged the authorities to seize the opportunity to promote credit-led growth, especially in productive sectors, while managing risks through fiscal discipline and structural reforms.

“Stronger coordination between fiscal and monetary authorities is key to ensure positive impact of the MPC decision on the manufacturing sector, the economy and sustainable development,” it emphasized.