There are indications that the manufacturing sector may have incurred as much as N2.163 trillion as interest paid on bank loans in 2023, representing a 27.65 percent increase compared to N1.565 trillion in 2022.

Data obtained from the Central Bank of Nigeria (CBN) showed average maximum lending rates at 27.98 percent and 28.09 percent in 2023 and 2022, respectively, while bank credits to the manufacturing sector in 2023 amounted to N7.73 trillion compared to N5.57 trillion in 2022.

The situation appears even grimmer for manufacturers this year, 2024 as average prime lending rate and maximum lending rate have risen to 20.65 percent and 30.25 percent, respectively, in the first quarter of 2024 (Q1’24). 

Analysis of available CBN data indicates that maximum interests payable on the sector’s loans from the banks in 2023 would have translated to N2.163 trillion and N1.565 trillion in 2022, based on banks’ credit to the sector.

The average prime lending rates were 14.01 percent and 12.27 percent for 2023 and 2022, respectively. This means that the minimum interest that manufacturers could have paid for their borrowings was N1.08 trillion in 2023 compared to N683.4 billion in 2022, representing an increase of 36.72 percent.

It is however common knowledge that it is practically impossible to secure loans at prime lending rates from banks in Nigeria.

The apex bank has continued to tighten banking sector liquidity by raising interest rates aimed at curbing the galloping inflation in the country.

Despite the measures, manufacturers continued to depend heavily on bank loans for working capital and capacity expansion, underscoring the resilience of the sector as reflected in the lending patterns of major banks. 

Director General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, has blamed the incessant hike in the benchmark interest rate by CBN as a major factor limiting manufacturers’ access to credit, leading to high cost of funds

“The hike in lending rate will continue to increase the cost of borrowing, impact operating costs, prices of products and profit margins, and make Nigeria’s goods less competitive to products from other nations,” he said. 

Meanwhile, available data showed that banks continued to support manufacturers with substantial loans in the year under review.

Zenith Bank emerged as the top lender in the manufacturing sector in 2023 with loans of N1.6 trillion up from N1.25 trillion in 2022. First Bank recorded N1.29 trillion loans to manufacturers in 2023, up from N769.7 billion in 2022. Access Bank also increased loans to the manufacturing sector, amounting to N839.1 billion by the end of 2023 from N746.4 billion in 2022. Stanbic IBTC also ramped up its lending, reaching N651.8 billion in 2023 from N425 billion in 2022. 

United Bank for Africa (UBA) Plc also gave out N495.8 billion loans in 2023, up from N468.6 billion in 2022.

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