MAN Warns ₦1.92 Trillion Credit Crisis Threatens Nigerian Manufacturing Sector

Nigeria’s manufacturing sector has raised an alarm that it 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 could undermine industrial growth, worsen unemployment and weaken the country’s economic diversification agenda.

The alarm was raised in a position statement 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.

MAN disclosed that commercial bank credit to manufacturing dropped by ₦1.92 trillion, from ₦8.53 trillion in December 2024 to ₦6.61 trillion in December 2025, representing a year-on-year contraction of 22.5 per cent.

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.

Nigeria Falling Behind Emerging Industrial Economies

The association compared Nigeria’s manufacturing financing environment with those of emerging industrial economies, adding that this steep decline leaves manufacturing lagging far behind the extractive Oil & Gas Industry (₦10.59 trillion) and a booming Finance sector (₦9.24 trillion), demonstrating a systemic preference for speculative and rent-seeking activities over tangible productivity.

According to the Association, “The 22.5% credit squeeze of ₦1.92 trillion from the manufacturing sector stands in unflattering contrast to contemporary global peers in 2025. For instance, India’s bank credit to industry grew by a robust 9.6% year-on-year by late 2025 as part of a deliberate 15% industrial credit expansion, while Vietnam aggressively projected a 19% to 20% credit growth target for 2025 to intentionally fuel its processing and manufacturing engines.

“Clearly, the Nigerian manufacturing sector cannot thrive without sustainable and growing financial foundations. The reduction in credit access could further limit capacity utilization, stall technological upgrades and hinder job creation. For the wider economy, reducing financial support to manufacturing could slow down vital diversification efforts, leaving the nation more vulnerable to external commodity shocks and supply-driven inflation.”

Major Factors Responsible for Lower Access to Credit

Analysis from recent economic data, industry reports and insights from key operators reveals that the contracted distribution of credit to manufacturing is rooted in a toxic combination of prohibitive interest rates, structural bureaucracy and policy misalignment.

It noted that 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 as the manufacturers continue to face average prime lending rates of about 27 percent and maximum lending rates exceeding 35 percent.

It added that such rates depict creating an environment where borrowing for long-term manufacturing capital expenditure is financially unviable.

MAN blamed the stringent Cash Reserve Ratio (CRR) policy maintained by the Central Bank for restricting liquidity within the banking system estimated between 45 and 50 percent which 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.

Elevated Cash Reserve Requirements & Risk Aversion of Commercial Banks

Consequently, it stated that the commercial banks impose their standard, risk-averse commercial criteria on these developmental funds, while manufacturers are subsequently asked to provide collateral and meet equity contributions that they cannot afford.

It noted that while the funds exist to help struggling manufacturers, they can only be accessed by large companies that are already highly liquid and secure.

₦1 Trillion Manufacturing Stabilisation Fund Yet to Materialise

A major source of hindrance for manufacturers is the continuous delay in implementing the proposed ₦1 trillion Manufacturing Stabilisation Fund 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.

MAN expressed concern that two years after its announcement, the fund remains largely unimplemented and 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 attributed the decline in manufacturing credit to the Central Bank’s decision to halt direct development finance interventions, adding that under previous intervention frameworks, manufacturers could access concessionary funding through initiatives such as the Real Sector Support Facility (RSSF).

It underscored that the suspension of new applications under such schemes has significantly reduced access to single-digit financing.

According to DG MAN, the manufacturers now depend largely on commercial lending windows where borrowing costs can exceed 35 percent as 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.

“Furthermore, the abrupt withdrawal of the central bank’s de-risking buffers has drastically amplified commercial bank risk aversion. With the entire credit-risk burden now resting on Participating Financial Institutions (PFIs), lenders have actively redirected capital away from long-term factory investments toward short-term, high-yield financial trades.

“To compound the crisis, the CBN’s strategy of outsourcing development financing exclusively to specialized Development Finance Institutions (DFIs), such as the Bank of Industry (BOI), creates a severe institutional transmission deficit. As these undercapitalized DFIs lack the sovereign liquidity-generation capacity of the central bank, this structural mismatch guarantees that Nigeria’s manufacturing frontline remains permanently starved of operational capital,” he added.

Critical Implications of the Manufacturing Credit Contraction

The steep -22.5% year-on-year contraction in commercial credit allocation to manufacturing creates severe bottlenecks across the entire sector. Based on financial data and operational insights from the field, here are the five primary macroeconomic implications of this credit squeeze:

Suppression of Manufacturing Capacity Utilization

With commercial borrowing costs remaining actively hostile at an average of 24.4% prime lending rates and 33.8% maximum lending rates, long-term capital investments are unviable. Starving factories of affordable credit blocks technology upgrades and prevents operators from maintaining optimal capacity utilization or expanding local manufacturing plants. It is practically impossible to build a 21st-century industrial economy when forcing factories to fund their capital footprint through 19th-century primitive capital constraints.

Structural Stagnation of Sectoral Contribution to National GDP

The sharp decline in credit to manufacturing can severely dampen the sector’s output, causing its contribution to real Gross Domestic Product (GDP) to remain structurally hobbled below the 10% mark, hovering tightly at 9.57%. When financing is eclipsed by less labour-intensive or highly speculative sectors, real economic growth becomes deeply uneven and fragile. Any economy that cannot drive its manufacturing contribution to GDP past a single-digit threshold is merely operating a glorified trading outpost, not building a production powerhouse.

Escalation of Workforce Downsizing and Structural Unemployment

A credit reduction of this scale forces the manufacturing firms into defensive, structural survival mode. Deprived of liquid operational funding to cope with high energy costs and currency fluctuation, domestic factories are pushed to systematically downsize or exit the market entirely.

Exacerbation of Supply-Side Inflation and Foreign Exchange (FX) Strain

When domestic manufacturing is starved of necessary financial grease, local productivity drops, making it impossible for internal supply chains to satisfy aggregate domestic demand. This supply shortfall directly triggers supply-side inflation and aggressively leaves the nation dependent on expensive imported finished goods, heavily draining external foreign exchange reserves. A nation that fails to deliberately finance its domestic production is condemned to continuously export its wealth and consistently import inflation and poverty.

Possibly Paralysis of the 2025 Nigeria Industrial Policy (NIP)

It also argued that a persistent credit squeeze can directly sabotage the successful execution of the 2025 Nigeria Industrial Policy (NIP), which is strategically designed to boost industrial productivity, enhance global competitiveness and drive massive job creation through dedicated financing frameworks, including proposed development funds and cluster financing.

On the contrary, it noted that the success of such a sweeping industrial policy is entirely dependent on a functional financial transmission mechanism, stressing that “If the banking ecosystem maintains severe risk aversion and prohibitively high lending rates, the promised capital cannot flow from government blueprints to the factory floor.”

MAN warned that the implementation of the 2025 Nigeria Industrial Policy could be severely undermined if financing constraints persist, the NIP’s ambitious targets for economic diversification and industrial revitalization become practically unfunded and unrealizable mandates.

The policy aims to drive industrialisation, create jobs and boost competitiveness, but stakeholders maintain that these goals cannot be achieved without accessible and affordable capital.

Ajayi-Kadir, emphasized that a visionary industrial policy without a functioning credit transmission mechanism will amount to a well-drafted but comatose aspirational policy, since it is practically impossible to kickstart a manufacturing revolution without actively financing the factories tasked with building it.

The Path Forward

The Association has consistently maintained that the current funding framework is unfit for purpose.

According to the Manufacturing State of Affairs 2025 report, without a dedicated, shielded financial mechanism, the sector cannot operate competitively. Therefore, key industry demands to rectify the funding failure include:

“Further reduce the benchmark interest rate by at least 200–300 basis points over the next two quarters to improve credit affordability for manufacturers,

“Reduce the Cash Reserve Ratio (CRR) for commercial banks that allocate at least 40% of their lending portfolio to manufacturers at single-digit interest rates.

“Increase the capital base of the Bank of Industry (BOI) to meet direct credit demands, bypassing the stringent commercial bank PFIs where possible.

“Expand the Bank of Industry (BoI) intervention fund to allow manufacturers to refinance high-interest commercial bank loans at a fixed 7–9% rate for a minimum of 10 years.

“Operationalize a 50% government-backed guarantee for commercial bank loans extended to Small and Medium Industries (SMIs) involved in value-added processing.

“Communicate the implementation status and enforce the release of the ₦1 Trillion Manufacturing Stabilization Fund.

“Transfer the management of the Manufacturing Stabilization Fund to the Bank of Industry (BOI) with a mandate for a 9% interest rate cap and a strict 7-day processing timeline for verified manufacturers.”

Conclusion

DG MAN acknowledged that the persistent financial starvation of Nigerian manufacturing stems not from an absolute scarcity of national capital, but from a fundamental breakdown in policy alignment and distribution architecture, stressing that deploying developmental funds through flawed commercial banking channels that prioritize short-term profitability and rigid collateral over long-term industrial viability inherently neutralizes their economic intent.

Accordingly, he said “In an environment destabilized by a high rate of foreign exchange and volatility (though less severe) and commercial lending rates soaring past 30%, these interventions do not catalyse real-sector growth. They have shown that allocating liquidity through a flawed mechanism does not help industrialization.

“To reverse this structural stagnation and unlock the sector’s potential, Nigeria must radically decouple developmental credit from the risk-averse restrictions of standard commercial banking frameworks.

“Outsourcing the financial survival of the manufacturing sector to undercapitalized development banks while the monetary system locks its primary liquidity vault is a structural mismatch that guarantees our productive frontline remains permanently starved of capital.

“Crucially, we earnestly implore the Central Bank to pivot away from measures that suffocate the manufacturing sector with affordable credit, while attempting to cure structural inflation. This will ensure that we do not inadvertently deepen the domestic supply-side deficits that drive prices upward in the first place.

“Government should demonstrate its commitment to economic diversification by establishing independent, transparently managed transmission channels capable of delivering genuine, single-digit interest rates directly to domestic manufacturers.

“The government should conduct an urgent manufacturing sector audit to ascertain the impact of the major reforms under this administration on the sector.

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