By Yinka Kolawole
The Manufacturers Association of Nigeria, MAN, has urged banks to reduce lending rates to manufacturers following the Central Bank of Nigeria’s 350-basis-point cut in the Monetary Policy Rate, MPR, saying lower borrowing costs are essential to reviving investment and production.
Director-General of MAN, Segun Ajayi-Kadir, made the call in a statement yesterday, describing the rate reduction as a gradual shift from the tight monetary conditions that had constrained manufacturing activities, particularly businesses dependent on working capital and investment financing.
According to him, lower interest rates would strengthen manufacturers’ ability to finance inventories, raw materials, production cycles, equipment purchases and business expansion.
He, however, warned that the impact of the MPR cut could be limited by the continued high Cash Reserve Ratio, CRR, which stands at 45 per cent for Deposit Money Banks and 16 per cent for Merchant Banks.
Ajayi-Kadir said the high CRR meant a significant proportion of bank deposits remained unavailable for lending to productive sectors.
“Improved liquidity conditions could increase credit availability and strengthen businesses’ ability to meet short-term financing needs. However, the benefits of the MPR reduction may not be fully realised if credit expansion to the real sector remains constrained,” he said.
He said manufacturers’ ability to benefit from the rate cut would depend largely on how quickly and effectively monetary policy was transmitted to actual lending rates.
The MAN director-general also called for further rate cuts, saying they would be necessary to achieve a meaningful reduction in borrowing costs for businesses.
The association urged stronger coordination between monetary and fiscal authorities to complement monetary easing with measures addressing structural constraints affecting production, including electricity, logistics, infrastructure and insecurity.
MAN also called for expanded access to concessionary single-digit financing for manufacturers and a progressive review of the CRR when macroeconomic conditions permit.
It urged the government to ensure that the 350-basis-point MPR reduction translates into lower lending rates for manufacturers.
Ajayi-Kadir added that future decisions of the Monetary Policy Committee, MPC, should be guided by their impact on the manufacturing and productive sectors, with the broader objective of increasing productivity, investment, industrialisation and employment.
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