Manufacturers still pay over 32% for credit despite easing rates

By Benson Daniel

Nigeria’s manufacturers may have received some relief from falling borrowing costs, but bank credit remains painfully expensive for businesses trying to produce, expand and keep their operations running.

Data from the Manufacturers Association of Nigeria showed that the average interest rate charged to manufacturers fell to 32.1 per cent in 2025, compared with 35.6 per cent a year earlier.

The improvement is welcome, but the numbers tell another story. Even after the decline, manufacturers were still borrowing at rates above 30 per cent across every major industrial segment covered by the survey.

Borrowing costs averaged 32.5 per cent in the first half of 2025 before easing to 31.8 per cent in the second half. The moderation reflected a gradual improvement in some of the economic conditions affecting the cost of credit, including softer inflation, more stable energy prices and a stronger naira.

For manufacturers, however, the relief has been limited.

The cheapest average borrowing rate was recorded by chemical and pharmaceutical manufacturers at 30.4 per cent. Wood and wood products followed at 30.8 per cent, while textile, apparel, carpet, leather and footwear companies paid an average 31.6 per cent.

Metal, iron, steel and fabricated metal manufacturers faced an average rate of 32.3 per cent, while electrical and electronics businesses borrowed at 32.4 per cent.

Food, beverage and tobacco manufacturers paid 32.5 per cent, with plastic, rubber and foam companies slightly higher at 32.6 per cent.

Motor vehicle and miscellaneous assembly manufacturers recorded an average rate of 32.8 per cent, the same rate faced by businesses in pulp, paper, printing, publishing and packaging.

At the top of the table were manufacturers of non metallic mineral products, who paid an average 33 per cent for loans.

The figures underline one of the less visible pressures on Nigerian factories. While attention often goes to electricity, fuel, foreign exchange and logistics costs, the price of money can be just as important.

A company borrowing at more than 30 per cent has to generate substantial returns simply to cover the cost of financing. For businesses using loans to purchase raw materials, maintain working capital or acquire machinery, that can quickly eat into already narrow margins.

It can also change investment decisions.

A manufacturer that might otherwise borrow to add a production line or replace outdated equipment may decide to wait when the expected return on that investment is not comfortably above the cost of the loan.

That has consequences beyond individual companies. Slower investment can limit production capacity, employment and the ability of local manufacturers to compete with imported products.

MAN has therefore continued to flag financing costs as a major obstacle to industrial competitiveness and output growth.

The easing recorded in 2025 nevertheless suggests that the direction of some of the underlying economic pressures is improving. The challenge is turning that improvement into borrowing conditions that manufacturers can actually work with.

For the real sector, a modest fall from 35.6 per cent to 32.1 per cent is progress, but it is hardly cheap money.

Until the cost of credit falls further, manufacturers will continue to make difficult calculations about whether to borrow, how much to borrow and whether a planned expansion can generate enough returns to justify the financing cost.

The latest figures therefore present a mixed picture: borrowing conditions are improving, but Nigerian manufacturers are still paying a steep price to access the capital needed to grow.