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MAN urges CBN to reduce lending rates to real sector for competitiveness

*The Manufacturers’ Association of Nigeria laments the relatively high costs of funds have been one of the major challenges of the manufacturing sector, affecting the costs of production and real sector’s competitiveness

Isola Moses | ConsumerConnect

As one of the major challenges facing the manufacturing sector of the country’s economy, the Manufacturers’ Association of Nigeria (MAN) has urged the Central Bank of Nigeria (CBN) to take rigorous monetary management measures to encourage reduction in lending rates on loans by the Deposit Money Banks (DMBs).

MAN the appeal to Bakers’ Bank in its ‘Manufacturers CEOs Confidence Index (MCCI)’ for second quarter 2021, when it stated: “With the Monetary Policy Rate (MPR) standing at 11.5 per cent, there may not be credible reason the average lending rate to manufacturers by the banks was still as high 22 percent.”

Mr. Godwin Emefiele, Governor of CBN

The association lamented that cost of funds in Nigeria, which is usually at double digit, has been one of the major challenges of the manufacturing sector, and this is because it affects the cost of production and the sector’s competitiveness.

It was also learnt MAN uses the MCCI as barometer to garner the perceptions of CEOs of manufacturing firms on changes in the economy.

According to the association, the MCCI gauges changes in key macroeconomic indicators including sector specific factors that represent government activities and policy measures in the economy.

The MCCI report in the second quarter of 2021 as well noted that the majority (76 percent) of manufacturers enumerated in the fieldwork of the report admitted that the rate at which commercial banks lend to manufacturers discourages productivity in the manufacturing sector.

MAN said: “Lending to the real and the manufacturing sectors have dwindled over the years.”

“The increased presence of the government in the money market – government treasury bill, bonds, sukuk, etc., which have almost crowded out private sector borrowing in the market”.

“It is, therefore, pertinent that the government balances its participation in the money market with the interest of the private sector.”

It also added that CBN should update manufacturers regularly with status reports on the implementation of the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMED), N300 billion Real Sector Support Facility (RSSF), and the N1 Trillion COVID-19 stimulus to further encourage operators to take advantage of the window.

As part of measures to address the lack of credit facilities or lack of funds for industries, the high lending rate, therefore, MAN has called for the recapitalisation of Bank of Industry (BoI) and Bank of Agriculture (BoA) in order to “adequately meet the productive sector’s credit need at single digit interest rate.”

Providing a credit guarantee for industrial loans from commercial banks would go a long way in addressing the productive sector’s challenge of access to credit, MAN stated.

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