N1.92trn Credit Crunch Threatens Nigeria's Industrialisation Drive

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The Manufacturers Association of Nigeria (MAN) has raised the alarm over the sharp decline in bank credit to the manufacturing sector, warning that the development could undermine industrial growth, worsen unemployment and jeopardise the implementation of the Nigeria Industrial Policy (NIP) 2025. The association noted that the sector suffered a 22.5 per cent contraction in credit, equivalent to about N1.92 trillion.

MAN Director-General, Segun Ajayi-Kadir, said the sector cannot thrive without sustainable and growing financial foundations. "The Nigerian manufacturing sector cannot thrive without sustainable and growing financial foundations. Reduced access to credit limits expansion, innovation and competitiveness," he said.

The high cost of borrowing is the biggest obstacle preventing manufacturers from accessing available bank liquidity. The association noted that as of May 2026, average prime lending rates stood at about 27 per cent, while maximum lending rates had climbed to 35.6 per cent, making long-term industrial investment financially unsustainable.

MAN also pointed to the Central Bank of Nigeria's stringent Cash Reserve Ratio (CRR), estimated at between 45 and 50 per cent for commercial banks, as a policy that significantly restricts loanable funds within the banking system. The association lamented the continued non-implementation of the proposed ₦1 trillion Manufacturing Stabilisation Fund, despite its inclusion in the Federal Government's Accelerated Stabilisation and Advancement Plan (ASAP) since 2024.

The situation has been worsened by the CBN's suspension of new applications under its development finance programmes, including the Real Sector Support Fund (RSSF), which previously provided manufacturers with access to concessionary single-digit financing. "The withdrawal of these interventions has forced manufacturers into the commercial lending market, where interest rates exceeding 35 per cent make productive borrowing almost impossible," Ajayi-Kadir stated.

MAN warned that the continued contraction in manufacturing credit could suppress capacity utilisation, limit the sector's contribution to Gross Domestic Product (GDP), trigger workforce downsizing and exacerbate inflationary pressures by constraining domestic production. It also cautioned that weaker manufacturing output could increase demand for imports, thereby intensifying pressure on foreign exchange reserves and undermining broader economic diversification efforts.

MAN argued that the challenge is not a lack of capital within the economy but a structural failure in the way development finance is channelled to productive sectors. Deploying industrial intervention funds through conventional commercial banking channels that prioritise short-term profitability and rigid collateral requirements has largely neutralised their developmental impact.

To reverse the trend, MAN called for a fundamental restructuring of Nigeria's industrial financing framework, urging policymakers to decouple developmental credit from conventional commercial banking constraints and establish financing mechanisms specifically designed to support long-term industrial growth. The association maintained that without urgent reforms to improve access to affordable credit, Nigeria risks stalling its industrialisation drive and limiting the transformative impact of the Nigeria Industrial Policy 2025.

The Nigeria Industrial Policy (NIP) 2025 aims to promote industrial development and diversification in the country. The policy seeks to address the challenges faced by the manufacturing sector, including lack of access to affordable credit, high interest rates, and inadequate infrastructure. However, the policy's implementation has been slow, and the sector's growth remains hindered by various challenges.

"The Nigerian manufacturing sector cannot thrive without sustainable and growing financial foundations. Reduced access to credit limits expansion, innovation and competitiveness," MAN Director-General, Segun Ajayi-Kadir, said.