Manufacturers have decried the inadequate and high-cost of loanable funds, noting that the situation was exerting declining consequences on investment, capacity utilisation, manufacturing production and employment.
According to manufacturers, the cost of loanable funds remained a prime challenge of manufacturing in the country, averaging 21.5 per cent in 2021 as against 20.8 per cent in 2020. This represented a 0.7 per cent increase.
The Manufacturers Association of Nigeria (MAN) in its ‘Second Half Economic Review 2021’ (July-December 2021) released recently, lamented the increase in the average cost of borrowing in the manufacturing sector from commercial banks.
They said, for instance, that in the second half of 2021, interest rate charged to manufacturers increased to 24 per cent, from 22 per cent recorded in the same half in 2020, thus, indicating two percentage points increase over the period.
Cost of funds to the sector also increased by five percentage points when compared with 19 per cent recorded in the preceding half.
MAN Presiden Mansur Ahmed said cost of loanable funds remained a challenge to manufacturers in the half year under review notwithstanding the monetary easing stance of the Central Bank of Nigeria (CBN).
He said, for instance, that CBN’s monetary easing stance was underscored by the retention of Monetary Policy Rate MPR at 11.5 per cent with the asymmetric corridor at +100/-700 around MPR; Credit Reserve Ratio (CRR) at 27.5 per cent and Liquidity Ratio at 30% since November 2020.
The MAN chief acknowledged that the rationale for the monetary policy stance of the apex bank was to spur economic growth and maintain price stability in the economy.
He, however, expressed regrets that despite CBN’s expansionist monetary intervention, inadequate and high-cost loanable funds continued to be a prime challenge of manufacturing in the country.
“It is therefore important for the monetary authority to consider improving accessibility to the various CBN funding windows and entrench an ardent monetary policy that would moderate the current
lending rates to encourage investment and productivity in the manufacturing sector,” Mansur said.
He also said there was need to strengthen the Bank of Industry (BoI) and Bank of Agriculture (BoA) to adequately provide liberal finance for the manufacturing sector, as well as provide credit guarantee for industrial loans from commercial banks.
Mansur also called on the CBN to ensure effective allocation of available Foreign Exchange (forex) to productive sectors, particularly the manufacturing sector for importation of raw materials and vital machine and equipment that are not available locally. Manufacturers decry high cost of loanable funds