Manufacturers Warn Rising Credit and Production Costs Could Derail Recovery

By Benson Daniel

Nigeria’s manufacturing sector is facing renewed pressure from high borrowing costs and rising production expenses, with operators warning that the challenges could undermine the sector’s recovery despite an improvement in business confidence.

The concerns were contained in the Manufacturers Association of Nigeria’s Manufacturers’ CEOs Confidence Index for the second quarter of 2026, which showed that access to affordable finance remained one of the biggest obstacles confronting manufacturers.

According to the survey, about two out of every three manufacturing executives identified commercial bank lending rates as a major disincentive to productivity. Manufacturers also complained that the volume of credit available to businesses remained inadequate.

The manufacturers linked the high cost of borrowing to the Central Bank of Nigeria’s monetary policy stance, particularly the Monetary Policy Rate, which stood at 26.5 per cent during the period under review.

Although the rate had been reduced from previous levels, manufacturers maintained that it remained too high to adequately support the financing needs of the real sector.

High interest rates have increased the cost of accessing working capital and expansion financing, making it more difficult for companies to invest in new equipment, expand production lines, increase inventories and create additional jobs.

The manufacturers said the financing challenge was being compounded by rising energy, transportation, shipping and raw material costs, all of which continue to increase the overall cost of production.

Frequent electricity disruptions were also identified as a major challenge, forcing many businesses to rely heavily on alternative sources of power to keep their factories running.

The additional energy expenses have placed further pressure on manufacturers at a time when companies are already dealing with higher logistics and input costs.

Foreign exchange availability also remains a concern. Despite relative stability in the naira and reforms in the foreign exchange market, about half of the manufacturers surveyed said improved foreign exchange conditions had not translated into sufficient access to foreign currency for their businesses.

Limited access to foreign exchange affects manufacturers that depend on imported machinery, spare parts and raw materials, while fluctuations in the cost of imported inputs can make production planning more difficult.

Manufacturers also cited multiple taxation and inadequate infrastructure among the factors limiting their ability to operate at full capacity.

The concerns come against the backdrop of efforts by the government and monetary authorities to support economic recovery and strengthen domestic production.

Manufacturers have consistently argued that lower financing costs, improved power supply, better infrastructure and easier access to foreign exchange are necessary to translate economic reforms into stronger industrial output.

The sector remains important to Nigeria’s economic growth because of its contribution to employment, value addition, exports and the development of domestic supply chains.

A sustained increase in production would also help reduce dependence on imported finished goods and strengthen the country’s ability to retain foreign exchange.

However, manufacturers say achieving these objectives will require policies that reduce the cost of doing business and improve access to long term financing.

As the economy continues to adjust to ongoing reforms, industry operators are expected to closely monitor interest rates, energy costs, foreign exchange conditions and consumer demand.

The ability of manufacturers to overcome these pressures will be critical to determining whether the current recovery gains momentum or faces renewed setbacks.