Manufacturers seek government intervention as average lending rate hits 22.8%
Average lending rate from commercial banks to the manufacturing sector averaged 22.8 percent in 2017, according to latest data from the Manufacturers Association of Nigeria (MAN), necessitating calls for government intervention by local producers.
With proposed plans to reduce the lending rate in the first quarter of 2018 not realised, operators urge government to address the lingering concern in order to aid competitiveness of the industrial sector.
The average lending rate was 0.4 percentage point higher than 22.4 percent average recorded in 2016.MAN noted that inadequate and high interest rate remained major challenges to the manufacturing sector in the second half of 2017.
“A survey of manufacturers by MAN shows that cost of lending to the manufacturing sector stood at 23.05 percent in the second half of 2017 which is almost the same figure with 23.3 percent recorded in the corresponding period of 2016. However, it increased by 0.37 percentage point when compared with 22.65 percent recorded in the preceding half”, MAN explained in its H2 report.
The Minister of State for Industry, Trade and Investment, Hajia Aisha Abubakar had at a forum in Ogun State said plans were underway to ensure that from first quarter 2018, government will begin implementation on the reduction of interest rate for local manufacturers in order to tackle the issues of rising interest rate in the sector.According to her, “As government, it is our responsibility to continue to provide an enabling environment to the sectors where you are involved. We will go back and look at the sectors and see what the aggregate is for that sector for us to be able to come up with the aggregate to bear in that sector.”
MAN President, Dr Frank Jacobs however urged government to offer effective and beneficial stimulus to interest rate sensitive sectors to further propel growth as the economy is still largely static and fragile and urgently requires stimulus.He added that efforts should be made to consult with the Monetary Policy Committee to find ways and means of lowering interest rate to prevent the economy from being chocked and the rate of recovery being slowed down.
On its part, the Lagos Chamber of Commerce and Industry (LCCI) noted that access to and cost of fund in Nigeria has been and remains a big issue for many domestic investors.LCCI President, Babatunde Ruwase said: “With commercial bank lending rate at between 20-35%, depending on the borrower and other factors such as acceptability of collateral, it is very difficult to successfully access fund by the private sector especially the SMEs.
“We note the efforts of government through CBN and the Bank of Industry (BOI) to extend intervention funds to operators. “However, the range of beneficiaries and economic wide impact of government intervention funds remain very limited. Investors in many sectors cannot finance projects profitably at an interest rate above 10 per cent. These sectors are majorly agriculture, real estate, solid minerals among others”.