The Manufacturers Association of Nigeria (MAN) has called for lower lending rates and targeted financing for manufacturers, warning that the retention of high cash reserve requirements (CRR) could limit the impact of the Central Bank of Nigeria’s (CBN) recent interest rate cut.
 
The Director-General of MAN, Segun Ajayi-Kadir, said retaining the CRR at 45 per cent for deposit money banks (DMBs) and 16 per cent for merchant banks would constrain the proportion of deposits available for lending to the productive sector.
 
He acknowledged the importance of reserve requirements to financial and monetary stability but said the high CRR could undermine the transmission of monetary policy easing to businesses.
 
“Improved liquidity conditions could increase credit availability and strengthen businesses’ ability to meet short-term financing needs, but the benefits of the MPR reduction may not be fully realised if credit expansion to the real sector remains constrained because of the high CRR that reduces the available funds for lending or investment,” he said.
 
The CBN recently cut its Monetary Policy Rate (MPR) by 350 basis points from 26.5 per cent to 23 per cent.
 
Ajayi-Kadir said the extent to which manufacturers benefit from the reduction would depend largely on the speed and strength of monetary policy transmission.
 
He stressed that lower interest rates alone would not resolve the structural challenges confronting manufacturers, including unreliable electricity supply, high logistics costs, poor road infrastructure and other constraints associated with the business environment.
 
“More cuts are needed to achieve any meaningful impact as lower interest rates alone could not resolve the structural constraints that continue to raise production costs,” he said.
 
He called for stronger coordination between monetary and fiscal authorities to ensure that monetary easing was complemented by targeted fiscal and structural interventions.
 
According to him, such coordination is necessary to achieve lower lending costs, improve access to credit, stimulate productive investment and strengthen industrial growth.
  
MAN also urged the Federal Government and relevant stakeholders to expand access to concessionary, single-digit financing for manufacturers, particularly small and medium-sized enterprises (SMEs) and businesses operating in strategic sectors.
 
Ajayi-Kadir called for a review of the CRR for DMBs while maintaining safeguards for financial system stability.
  
He also urged the CBN to work with the Bankers’ Committee to ensure that the 350-basis-point MPR reduction translates into lower prime and maximum lending rates for manufacturers.
 
Beyond monetary policy, he urged the government to intensify efforts to reduce production costs by addressing electricity, transportation and logistics expenses, infrastructure deficits and insecurity.
 
He specifically called for stronger interventions to reduce industrial energy costs through improved electricity supply, increased domestic gas utilisation and incentives for alternative and renewable energy solutions.
 
He also advocated faster implementation of the Nigeria First Policy to strengthen domestic value chains, promote local sourcing of raw materials, reduce import dependence and create stronger demand for locally manufactured goods.
 
On foreign exchange, Ajayi-Kadir called for the use of the country’s growing external reserves buffer to create a dedicated and transparent FX window for legitimate manufacturers importing capital equipment and essential raw materials that are unavailable locally.
 
Such a mechanism, he said, would reduce manufacturers’ dependence on the parallel market and help improve the predictability of production costs.

He further called for the strengthening of the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) and other credit guarantee schemes to cover industrial SMEs.
 
Ajayi-Kadir also urged the government to revitalise structured, low-interest intervention programmes through the Bank of Industry (BoI) and Development Bank of Nigeria (DBN), with single-digit or low double-digit, long-term financing targeted at raw-material processing, machinery imports and local equipment fabrication.