Nigerian manufacturers have called on the Federal Government to introduce and implement policies that will encourage banks to reduce lending rates to businesses following the latest reduction in the Monetary Policy Rate.
The call followed the decision of the Monetary Policy Committee to cut the MPR by 350 basis points, from 26.5 per cent to 23 per cent, at its September 22, 2026 meeting.
While manufacturers have welcomed the reduction, they want the lower benchmark rate to translate into cheaper credit for businesses across the productive sector.
Manufacturers Want Cheaper Credit
For manufacturers, the cost of borrowing remains a major concern because many businesses depend on bank financing to purchase raw materials, maintain inventories, fund production and expand their operations.
Therefore, a reduction in the MPR could provide some relief if commercial banks subsequently reduce the rates they charge customers.
However, manufacturers have pointed out that a lower policy rate does not automatically mean businesses will receive loans at significantly cheaper rates.
Consequently, they are asking the Federal Government and monetary authorities to introduce additional measures that will improve the transmission of monetary policy to the real economy.
CBN Reduces MPR to 23 Per Cent
The latest decision represents a 3.5 percentage-point reduction in the benchmark interest rate.
The Monetary Policy Committee also adjusted the Standing Facilities Corridor around the new MPR while retaining the Cash Reserve Requirement at 45 per cent for deposit money banks and 16 per cent for merchant banks.
The decision reflects the monetary authorities’ assessment of current economic conditions and the need to recalibrate the monetary policy framework.
Nevertheless, manufacturers remain focused on what the decision means for the cost of credit available to businesses.
High Interest Rates Affect Production
High borrowing costs can affect manufacturers in several ways.
When businesses take loans at expensive rates, they must commit a larger portion of their revenue to debt servicing. As a result, companies may have less money available for purchasing equipment, expanding production lines, employing additional workers or increasing their inventory.
Furthermore, high financing costs can make long-term investment decisions more difficult, particularly for manufacturers that require substantial capital to establish or expand production facilities.
For smaller businesses, the impact can be even greater because they may have fewer financing options outside commercial bank loans.
Government Policies Could Support Lower Lending Rates
Manufacturers are therefore calling for policies that will encourage banks to provide more affordable financing to the productive sector.
One possible approach involves targeted financing programmes that provide businesses with access to credit at more manageable rates.
In addition, government-backed credit guarantees could reduce some of the risks associated with lending to businesses and encourage financial institutions to extend more credit to viable manufacturers.
The authorities could also consider measures that strengthen the flow of funds toward productive activities while maintaining financial stability.
Manufacturing Faces More Than Interest Rate Challenges
Meanwhile, manufacturers continue to deal with several other challenges that affect their operating costs.
Electricity expenses, transportation, logistics, infrastructure gaps, foreign exchange pressures, taxes and other levies can all increase the cost of production.
Therefore, reducing lending rates alone may not completely resolve the difficulties facing the manufacturing sector.
Instead, manufacturers are seeking a broader policy approach that combines affordable financing with improvements in infrastructure, energy supply, logistics and the overall business environment.
Lower Credit Could Boost Investment
If commercial lending rates decline significantly, manufacturers could have greater capacity to invest in production.
For instance, businesses could use cheaper financing to acquire modern machinery, upgrade factories, purchase additional raw materials and expand their production capacity.
Moreover, improved access to affordable credit could encourage companies that have postponed investment because of high financing costs to reconsider their expansion plans.
Consequently, cheaper credit could support increased production and potentially create additional employment opportunities across the manufacturing value chain.
Monetary Policy Transmission Remains Important
Another key issue is how quickly the reduction in the MPR will reach businesses.
The benchmark rate influences the broader financial system, but commercial banks consider several other factors when setting lending rates. These include their cost of funds, perceived risks, liquidity conditions and operating expenses.
As a result, a 350 basis-point reduction in the MPR does not necessarily mean that manufacturers will receive loans at rates that fall by the same amount.
This is why manufacturers are calling for policies that can strengthen monetary policy transmission and ensure that productive businesses benefit from the change.
Manufacturers Await the Impact
Ultimately, the response from manufacturers shows that the debate has moved beyond the reduction of the benchmark interest rate to the practical cost of obtaining credit.
The cut from 26.5 per cent to 23 per cent represents a significant adjustment in monetary policy. However, manufacturers want to see the reduction reflected in the interest rates offered by commercial banks.
At the same time, they continue to seek solutions to other structural challenges affecting production costs and competitiveness.
As the new monetary policy framework takes effect, manufacturers will therefore be watching for lower lending rates, improved access to credit and policies that make it easier for businesses to invest, produce and expand.
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