Manufacturers across Nigeria have been advised to explore alternative financing models, including leasing arrangements and equity markets, as traditional bank loans become increasingly unaffordable amid rising interest rates.
The call was made by the Chairman of the Manufacturers Association of Nigeria (MAN), Ogun State Branch, George Onafowokan, during the association’s 40th Annual General Meeting held in Abeokuta.
Speaking on the theme, ‘Financing Manufacturing Concerns: Exploring Alternatives’, Onafowokan warned that manufacturers could no longer depend solely on commercial bank loans, which have become unsustainable due to the Central Bank of Nigeria’s monetary policy rate of 27.5 per cent.
“With the last official MPR at 27.5 per cent as of May, excluding bank charges and processing fees, repaying commercial bank loans has become burdensome,” he stated, emphasizing how high rates erode profit margins on manufactured goods.
The MAN chairman identified several viable alternatives for manufacturers seeking affordable credit, including leasing arrangements, equity financing, green bonds, and support from development finance institutions such as the Bank of Industry, African Development Bank and African Export-Import Bank.
He particularly highlighted the potential of equipment leasing with ownership options, noting that factory expansion plans often require significant asset procurement in an environment characterised by steep foreign exchange costs and elevated interest rates.
Onafowokan painted a stark picture of the challenges confronting Nigerian manufacturers, citing soaring energy costs, foreign exchange volatility, high inflation and weakening consumer purchasing power as major obstacles to sustainable operations.
“The manufacturing sector has faced particular strain from currency devaluation, with foreign exchange rates rising from N447 per dollar in December 2022 to N635 in December 2023, and reaching as high as N1,605 per dollar by 2024.”
Despite these formidable challenges, he commended Ogun State manufacturers for their resilience and commitment to overcoming economic adversities while pursuing stabilization and expansion goals.
Onafowokan drew attention to recent federal government interventions, including the N75 billion Manufacturing Sector Fund and N75 billion MSME Intervention Fund, both disbursed through the Bank of Industry at nine per cent interest rates with flexible repayment terms of one to five years.
The National President of MAN, Otunba Francis Meshioye, used the platform to call on federal and state governments to prioritize local manufacturing through supportive policies and procurement practices. He also urged the Central Bank of Nigeria to settle outstanding $2.4 billion in forex forwards owed to manufacturers, warning that continued delays were stifling production capacity.
Ogun State Commissioner for Industry, Trade, and Investment, Adebola Sofela, representing Governor Dapo Abiodun, assured manufacturers of continued government support through tax harmonisation and infrastructure development initiatives aimed at improving the business environment.
