The Manufacturers Association of Nigeria (MAN) has expressed concerns that the frequent hikes in the Monetary Policy Rate (MPR) are destabilizing manufacturing activities and stagnating Nigeria’s economic growth.
According to the recent MAN’s CEO’s Confidence Index Report (MCCI), the average maximum lending rate charged by commercial banks on manufacturers’ finances rose to 35% in Q2 2024 from 28.6% in Q1 2024.
This has increased the cost of goods, compounded the inflationary problem, and threatened employment in the sector.
The continuous increases in MPR have tightened financial conditions for the productive sector, leading to higher borrowing costs and reduced access to capital.
The report noted that the increase in interest rates will lead to escalation of production costs, prices of finished goods, unemployment, and social instability. Reduced capacity utilization, consumer demand, and profitability.
MAN also highlighted that the MPR hikes will stifle investment, innovation, and curtailed opportunities for growth trigger closure of more manufacturing concerns and constrained capacity to compete effectively in global and regional markets.
This will also onstrain reinvestment for expansion due to significant interest payments, reduced access to capital, with only 16% of total commercial bank credit disbursed to the manufacturing sector in Q1 2024.
The flow of investments into the sector and funds required for retooling, upgrading facilities, and procuring new technologies has also been hammered.
MAN urged the Monetary Policy Committee (MPC) to stabilize prices and consider the survival of manufacturing in Nigeria when making monetary policy decisions.
The association also advised the government to conduct a comprehensive assessment of the impact of previous MPC decisions on inflation rates over the last five years.
MAN recommended that the Central Bank of Nigeria (CBN) should insulate the productive sector from the impact of continuous MPR hikes, dsburse the N75 billion single-digit loan approved by the President Bola Tinubu administration for the manufacturing sector.
The Association further called for fiscal support systems to enable the manufacturing sector to import raw materials, spares, and machines at concessionary duty rates.
Other demands include:
– Minimizing pressure on foreign exchange reserves by incentivizing backward integration and local sourcing
– Enforcement of Executive Order 003 to enhance support for local industries and ramp up domestic production
– Addressing the issue of low manufacturing productivity and food production occasioned by high-level insecurity across the country
– Utilizing Forex revaluation gains to improve patronage of made-in-Nigeria products and upgrade electricity, road, and rail networks within industrial hubs, and
– Encouraging nationwide investments in renewable energy sources to alleviate energy costs and enhance competitiveness