Members of the organised private sector have raised an alarm that the current 27.5 per cent benchmark interest rate poses a grave threat to the survival of local industries and the successful implementation of the ‘Nigeria First’ procurement policy.
In separate interviews with our correspondents, as well as a statement on Wednesday, the OPS pointed out that the recently approved Nigeria First policy of the Federal Government might derail if interest rates remained high nationwide.
Director-General of the Manufacturers Association of Nigeria, Segun Ajayi-Kadir, warned that the Central Bank of Nigeria’s decision to retain the Monetary Policy Rate at 27.5 per cent since November 2024 was “suffocating the capacity of the manufacturing sector” and undermining national industrial goals.
“The ‘Nigeria First Policy’, which seeks to strengthen local industry and reduce import dependence, may be under severe threat,” Ajayi-Kadir warned, adding that access to affordable financing is central to its implementation.
The Nigeria First policy is a public procurement policy which mandates all government ministries, departments and agencies to patronise made-in-Nigeria products. It recently passed the second reading at the National House of Assembly.
MAN’s advocacy comes after the Monetary Policy Committee on Tuesday decided to retain the MPR at its current state for the second consecutive time, despite earlier calls from the private sector to the MPC to ease up on the record-high rate.
“We are perturbed that when most progressive economies are charting a course toward industrial recovery and macroeconomic stability, Nigeria’s monetary stance tends to lead us in a different direction,” Ajayi-Kadir lamented. “A nation cannot industrialise on the back of prohibitively expensive credit.”
Ajayi-Kadir worried that the MPC’s insistence on holding the MPR, which sets the benchmark for interest rates, has resulted in local manufacturers facing lending rates exceeding 37 per cent.
According to him, this has pushed finance costs for manufacturers from N1.43tn in 2023 to N2.06tn in 2024, indicating a 44 per cent surge that is “directly depressing productivity and leading to underutilisation of industrial capacity.”
Meanwhile, MAN’s DG decried the different effects of the MPC’s decision to hold rates on the manufacturing and financial economic sectors. He described the situation as an “economic paradox” where “banks enjoy widening profit margins, while manufacturers contend with shrinking margins, rising debts, and declining productivity.”
He noted that while most advanced economies, including the Euro Area, the UK, China, and Egypt, have slashed rates to stimulate growth, “Nigeria’s rigidity continues to create unintended consequences that may deepen the parlous performance of the productive sector.”
MAN warned that the country cannot industrialise “on the back of prohibitively expensive credit,” stressing that manufacturers across small, medium, and large-scale categories are struggling to stay afloat, expand operations, or meet basic running costs.
MAN argued that the prevailing monetary stance undermines the manufacturing sector and emboldens speculative foreign portfolio inflows at the expense of long-term industrial growth.
“A nation that woos foreign portfolio investors at the expense of its real sector may unwittingly be aspiring to build prosperity on the back of volatility,” Ajayi-Kadir cautioned.
The group urged the CBN to take immediate action, calling for a significant cut in the benchmark interest rate to reflect current economic realities and ease the credit burden on manufacturers.
MAN also called for the deployment of moral suasion and policy incentives to ensure commercial banks offer single-digit concessionary rates for manufacturers.
The group also sought a swift approval and disbursement of the N1tn industry support fund under the Stabilisation Plan, an upward review of the Bank of Industry’s capital base to meet rising credit demand, and an immediate settlement of the $2.4bn Foreign Exchange forward contracts to restore industrial confidence.
It also called for a pegged customs duty exchange rate for importing critical raw materials and machinery.
Further, Ajayi-Kadir emphasised that industrial confidence is “a fragile currency,” warning that continued policy inaction could derail national economic resilience.
“We urge the Central Bank to act decisively and in synergy with the fiscal authority to ensure that Nigeria’s manufacturing sector does not sink deeper into stagnation. The time to act is now,” he asserted.
Similarly, the Lagos Chamber of Commerce and Industry called on the MPC to provide a framework to ease the interest rate benchmark.
LCCI Director-General Dr Chinyere Almona, in a statement on Monday, acknowledged the MPC’s decision to maintain the current rates “reflected a balanced approach: one that avoids inflationary risks while allowing time for consistent macroeconomic trends to emerge.”
Almona explained, “Despite the drop in inflation to 23.71 per cent, Nigeria’s macroeconomic conditions remain harsh due to the persistent inflationary pressures, fuelled by exchange rate volatility, rising fuel and logistics costs, and deep-rooted structural challenges, including insecurity and disruptions in food production.
“A premature reduction in interest rates under such conditions could undermine investor confidence and raise doubts about the CBN’s commitment to price stability.”
However, the LCCI urged the MPC to proceed with a measured approach “to complement this rate hold with a forward-guided, data-driven roadmap for future easing.”
According to the chamber, the business community needs a strategy which accounts for slowing inflation, stabilising FX and real sector recovery, which provides them with the clarity for medium- and long-term planning.
“Key indicators for future rate reductions should include a trend of disinflation over at least two to three months, improved FX liquidity and stability, and concrete signs of recovery in the real sector—particularly concerning credit accessibility to micro, small, and medium-sized enterprises,” Almona advised.
The LCCI worried that the current MPR level remains prohibitively high for private sector development as MSMEs are being squeezed by the high cost of credit.
“Without affordable financing, their capacity to grow, compete, and contribute to economic development is severely limited,” she cautioned.
The LCCI recommended the CBN consider its “market-friendly proposals,” including “remaining consistent with the reforms that support price stability through increased production in the real economy and to reinforce development finance initiatives by offering concessional rates to high-impact sectors such as manufacturing, agriculture, renewable energy, and power supply.”
The chamber also highlighted that development finance institutions like the Development Bank of Nigeria, Bank of Agriculture, NEXIM Bank, and the Bank of Industry need better funding and directions to support the productive and industrial sectors of the economy.
Almona added, “Promote transparency in bank lending rates to ensure borrowers are not unfairly burdened by excessive spreads above the MPR. Implement measures to stabilize the FX market, reduce arbitrage opportunities, and rebuild investor confidence, critical steps for reducing imported inflation.”
Further, the National Vice President of the Nigerian Association of Small Scale Industrialists, Segun Kuti-George, aligned with other members of the private sector’s view that a sustained high interest rate was detrimental to the ‘Nigeria first’ policy, warning that the rate would stifle business growth and undermine economic stability.
“I agree that high interest rates are detrimental to business growth, as they significantly increase the cost of production,” Kuti-George noted. “This rise affects the prices of goods and services, especially due to the elevated cost of raw materials required for manufacturing. As a result, locally produced goods become more expensive.
“When these goods are compared to imported alternatives and found to be costlier, consumers are more likely to opt for the cheaper imported options. This shift in consumer preference reduces the market share and profit margins of local manufacturers.
“Over time, declining profits can force businesses to downsize their workforce, leading to higher unemployment. In more severe cases, persistently high production costs may cause some businesses to shut down entirely. Thus, sustained high-interest rates not only stifle business growth but also undermine economic stability by discouraging local production, increasing reliance on imports, and contributing to job losses.”
The Association of Small Business Owners of Nigeria’s National President, Dr Femi Egbesola, said the current high interest rate regime by the Central Bank of Nigeria was detrimental to the ‘Nigeria First’ Policy.
He said, “The current high interest rate regime by the Central Bank of Nigeria is detrimental to Nigeria’s First Policy. At the heart of this policy is the drive to boost local production, reduce import dependency, and strengthen the capacity of Nigerian manufacturers and small businesses. However, when borrowing costs are prohibitively high, businesses, especially SMEs and nano enterprises, find it difficult to access funding for expansion, raw materials, and equipment. This stifles innovation, limits production, and undermines the very foundation of the policy.
“More importantly, the cost of credit directly impacts the pricing of locally manufactured goods. When businesses borrow at high interest rates, those costs are passed on to the consumer, making locally produced goods less competitive compared to cheaper imported alternatives. This defeats the purpose of promoting Made-in-Nigeria products and discourages consumers from buying locally. It also leads to inflationary pressures, further reducing purchasing power and business confidence.
“While we understand the CBN’s intent to manage inflation and stabilise the economy, such monetary policies must be balanced with the realities of the productive sector. We urge the CBN to explore alternative tools that support economic growth without stifling business development. A more SME-friendly interest rate regime is crucial to sustaining the Nigeria First Policy and ensuring that local enterprises can thrive and contribute meaningfully to national development.”
The PUNCH earlier reported that the Chairman of the Organised Private Sector of Nigeria, Dele Oye, advocated for a reduction of the MPR to prevent slowed business growth.
Oye in a virtual interview with The PUNCH warned that “a hike in the interest rate by CBN can have several potential consequences for businesses, including increased borrowing costs and higher interest rates, which means that loans and lines of credit become more expensive, increasing the cost of financing for businesses, thus increasing operational costs.”
He lamented that as borrowing becomes more expensive, businesses may delay or scale back on investments for expansion, new projects, or capital improvements. “This can slow down business growth and innovation and decrease consumer spending, ” the OPSN chairman warned.
