Manufacturers Association of Nigeria (MAN) and Lagos Chamber of Commerce and Industry (LCCI), yesterday, differed on the retention of the 27.5 per cent benchmark interest rate and other key monetary policy parameters by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN).
MAN said it was deeply concerned about CBN’s continued decision to maintain the Monetary Policy Rate (MPR) at 27.5 per cent, despite a global wave of interest rate reductions aimed at revitalizing economic productivity and combating stagflation.
MAN, therefore, called for a significant cut in the benchmark interest rate “to reflect current realities and ease the credit burden on manufacturers.”
But LCCI said maintaining the current rate reflects a balanced approach: one that avoids inflationary risks while allowing time for consistent macro-economic trends to emerge.
It urged the CBN’s MPC to “complement this rate hold with a forward-guided, data-driven roadmap for future easing,” noting that “such a strategy would provide the business community with the clarity needed for medium-and long-term planning.”
The CBN’s MPC had retained the benchmark interest rate and other key monetary policy parameters. The MPC, the highest policy-making body of the apex bank, left the MPR at 27.50 per cent after its meeting in Abuja.
The MPR is the benchmark interest rate that guides other rates across the economy. The MPC also kept the asymmetric corridor, which determines the rates at which CBN lends to and borrows from commercial banks, around the MPR at +500 to -100 basis points.
The Committee also decided to maintain the Cash Reserve Ratio (CRR) for deposit money banks at 50 per cent and for merchant banks at 60 per cent. The CRR specifies the portion of a bank’s total deposits that must be held with the apex bank.
Also, the MPC retained Liquidity Ratio (LR) at 30 per cent. The LR sets the minimum amount of liquid assets a bank must hold to meet its short-term obligations.
Reacting to the MPC’s policy posture, MAN said it was perturbed that when most progressive economies are charting a course toward industrial recovery and macroeconomic stability, Nigeria’s monetary stance tends to lead economic actors in a different direction.
The Association pointed out that over the last quarter, countries such as members of the Euro Area, the United Kingdom, Denmark, Australia, China, India, Thailand and Egypt, have implemented interest rate cuts to bolster economic growth and support productive sectors.
It, however, said yet, Nigeria’s rigidity continues to create unintended consequences that may deepen the parlous performance of the productive sector.
“A nation cannot industrialise on the back of prohibitively expensive credit. With the benchmark interest rate held at 27.5 per cent, Nigeria has become the 6th most expensive country to source credit as local manufacturers grapple with an average lending rate of over 37 per cent,” MAN Director-General, Segun Ajayi-Kadir, said.
The MAN DG, in a statement insisted that the “CBN’s policy posture is not only inflationary, but is suffocating the capacity of the manufacturing sector.
“Compounded by other limiting factors, our members—small, medium and even large-scale—are finding it increasingly difficult to stay afloat, expand production lines, or even meet basic operational costs”.
He said when credit is priced highly, production declines and the nation “imports poverty”.
Ajayi-Kadir pointed out that MAN’s concerns go beyond the debilitating impact on numbers’ business. “The Nigeria First policy, which seeks to strengthen local industry and reduce import dependence, may be under severe threat,” he stated.
He said at the heart of the policy’s successful implementation lies access to affordable financing to boost capacity utilization.
“Unfortunately, the current interest rate regime constrains finance costs for our members, surging by over 44 per cent from ₦1.43 trillion in 2023 to ₦2.06 trillion in 2024 and rising,” he said.
This, according to him, represents a sharp increase that has directly depressed productivity and led to underutilization of industrial capacity.
Ajayi-Kadir said the high cost of credit has not only diminished the flow of investments into the manufacturing sector but has also dulled the return on existing investments, with Small and Medium Industries (SMIs) hit the hardest.
He further lamented that confidence in the industrial outlook has waned, as evident in the dip in the Manufacturers CEO’s Confidence Index from 50.7 points to 48.3 points, which mirrors the growing anxiety of manufacturers.
“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. We are disturbed by the implicit prioritization of short-term foreign capital inflows over the long-term health of domestic industries.
While maintaining a high interest rate of 27.5 per cent may temporarily attract speculative foreign portfolio investors, it is doing so at the expense of Nigeria’s manufacturing base, which is now choked by unsustainable borrowing costs,” the MAN DG stated.
He said what is evident now is the widening profitability of the banking sector, buoyed by elevated interest margins, while manufacturers contend with shrinking margins, rising debts and declining productivity.
“This is an economic paradox that must be urgently addressed. The current monetary policy trajectory risks turning banks into vaults of idle wealth, while the real economy—where jobs are created and value is added—faces suffocation.
A society that rewards intermediaries over producers invites long-term decline. Access to affordable credit is the oxygen that sustains industrial growth and no economy has ever grown by starving its manufacturers of oxygen,” Ajayi-Kadir emphasised.
The LCCI, however differed, arguing that maintaining the current rate reflects a balanced approach: one that avoids inflationary risks while allowing time for consistent macro-economic trends to emerge.
“The LCCI urges the MPC to complement this rate hold with a forward-guided, data-driven roadmap for future easing. Such a strategy would provide the business community with the clarity needed for medium- and long-term planning,” LCCI DG Dr. Chinyere Almona, said.
Dr. Almona said while the recent marginal decline in headline inflation offers some relief, it recommends that CBN adopt a cautious stance while also providing a clear signal of possible future easing, subject to sustained economic improvements.
“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,” she said.
The LCCI chief, therefore, said: “A premature reduction in interest rates under such conditions could undermine investor confidence and raise doubts about the CBN’s commitment to price stability.”
According to her, key indicators for future rate reductions should include a trend of disinflation over at least two to three months, improved foreign exchange (FX) liquidity and stability, and concrete signs of recovery in the real sector—particularly with respect to credit accessibility to Micro, Small, and Medium-sized Enterprises (MSMEs).
While kicking against “A premature reduction in interest rates,” LCCI admitted that “The current MPR level remains prohibitively high for private sector development. MSMEs, the engine of job creation and productivity in Nigeria, 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. Moreover, it is increasingly clear that monetary policy alone cannot curb inflation that stems from structural and supply-side inefficiencies,” LCCI said.
It said coordinated action with fiscal authorities is essential to address the root causes of inflation, such as insecurity, infrastructure deficits, and food supply disruptions.
To cushion the real sector while maintaining price discipline, the LCCI stressed the need to remain consistent with the reforms that support price stability through increased production in the real economy, and reinforce development finance initiatives by offering concessional rates to high-impact sectors such as manufacturing, agriculture, renewable energy, and power supply.
It also pushed for increased funding for Development Finance Institutions (DFIs) like the Development Bank of Nigeria, Bank of Agriculture, NEXIM Bank, and the Bank of Industry.
The LCCI also canvased the promotion of transparency in bank lending rates to ensure borrowers are not unfairly burdened by excessive spreads above the MPR, including implementing measures to stabilize the FX market, reduce arbitrage opportunities, and rebuild investor confidence.
The Chamber emphasised that the path forward must balance inflation containment with the urgent need to revitalize Nigeria’s productive economy.
“Now is the time for careful, data-informed monetary signaling coupled with strategic support for the real sector. We urge the CBN and the Federal Government to incorporate these perspectives into their policy decisions to foster sustainable growth and economic resilience,” LCCI said.
