The Manufacturers Association of Nigeria (MAN) has raised serious concerns over the continuous increase in the country’s Monetary Policy Rate (MPR), warning that the trend could lead to the collapse of the manufacturing sector.
In a statement released on Wednesday, MAN Director General Segun Ajayi-Kadir highlighted the detrimental effects of the MPR hikes, which he said are escalating production costs and driving up prices of finished goods. This, he noted, could result in higher unemployment rates and increased social instability. The hikes further exacerbate low consumer demand, reduce capacity utilization, and erode profitability within the sector.
“The continuous rise in the MPR will stifle the capacity for new investments and innovation, curtailing opportunities for growth,” Ajayi-Kadir stated. “It hampers the sector’s ability to compete effectively in both regional and global markets and, if unchecked, could lead to the critical distress of more manufacturing enterprises.”
He also pointed out that the higher interest rates limit manufacturers’ ability to reinvest for expansion and to introduce new brands, as a significant portion of their revenue is now directed toward interest payments.
Ajayi-Kadir emphasized that access to capital is already constrained, with only 16% of total commercial bank credit being disbursed to the manufacturing sector in the first quarter of the year. This limited access to funds reduces the flow of investments necessary for retooling, upgrading facilities, and procuring new technologies.
“It is noteworthy to state that the worrisome trend caused by the increase in the cost of borrowing is corroborated by the NBS report, indicating a significant decline in manufacturing investment in the second quarter of the year,” he said. “This drop underscores the critical link between domestic investment confidence and foreign investor sentiment. Additionally, the share of manufactured exports in non-oil exports declined from 21.4% in Q4 2023 to 15.1% in Q1 2024.”
The MAN Director General called for urgent policy intervention to address the adverse effects of the MPR hikes on the manufacturing sector, stressing the need for a more favorable borrowing environment to sustain and grow the industry.