Nigeria’s manufacturing sector continued to face prohibitively expensive credit in 2025, with the average interest rate on industrial loans standing at 32.1 per cent.

Although the figure represented an improvement from the 35.6 per cent average recorded in 2024, borrowing costs remained too high to support sustainable industrial expansion and long-term investment.

Data from the Manufacturers Association of Nigeria showed that the average lending rate was 32.5 per cent during the first half of 2025 before declining slightly to 31.8 per cent in the second half.

Despite the moderation, every major manufacturing segment surveyed by MAN recorded an average borrowing rate above 30 per cent.

Chemical and pharmaceutical manufacturers faced the lowest annual average rate at 30.4 per cent, followed by wood, furniture and related producers at 30.8 per cent.

Manufacturers of textiles, clothing, carpets, leather and footwear obtained loans at an average rate of 31.6 per cent.

Metal, iron, steel and fabricated-metal producers paid an average of 32.3 per cent, while electrical and electronics manufacturers faced a rate of 32.4 per cent.

The average borrowing rate for food, beverage and tobacco companies stood at 32.5 per cent. Plastic, rubber and foam manufacturers paid 32.6 per cent.

Motor vehicle and miscellaneous assembly companies recorded an average lending rate of 32.8 per cent. The pulp, paper, printing, publishing and packaging sector faced the same rate.

Non-metallic mineral-product manufacturers recorded the highest average borrowing cost at 33 per cent.

The high rate in the non-metallic mineral sector could have direct implications for Nigeria’s housing and construction industries because the segment produces important building inputs, including cement, ceramics, glass, tiles and related materials.

When manufacturers finance production, machinery, raw materials and expansion at interest rates above 30 per cent, part of the cost may eventually be transferred to consumers through higher product prices.

Elevated borrowing costs can also discourage companies from increasing capacity, upgrading equipment or developing new factories. This could further weaken local production and increase dependence on imported goods.

MAN attributed the slight reduction in lending rates during 2025 to improving economic conditions, including lower headline inflation, greater stability in energy prices and the appreciation of the naira.

However, the association maintained that the cost of credit remained a serious obstacle to manufacturing competitiveness and output growth.

Manufacturers require financing to purchase raw materials, maintain equipment, meet working-capital obligations and expand production. At prevailing commercial lending rates, many businesses may struggle to generate returns sufficient to cover their financing costs.

The situation is particularly concerning for small and medium-sized manufacturers, which generally have fewer financing options and weaker balance sheets than large corporations.

The figures suggest that Nigeria must move beyond modest reductions in commercial lending rates and develop more accessible, long-term industrial finance for productive sectors.

Without affordable credit, efforts to increase local manufacturing, reduce building-material costs, create jobs and improve the competitiveness of Nigerian products could remain constrained.

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Calls are growing for the Federal Government to make the Lagos Airport perimeter fencing project a showcase of its “Nigeria First” policy by sourcing materials from capable local manufacturers in line with executive orders on local content.

MAN’s Director General, Segun Ajayi-Kadir, stressed that the association is not attempting to influence the contract award but is appealing for procurement decisions that place national interest above foreign patronage. He explained that prioritising local firms would help create jobs, ease pressure on foreign exchange, boost tax revenues, and strengthen Nigeria’s industrial base.

Ajayi-Kadir maintained that Nigerian companies have the expertise and facilities to produce Clear Vu fencing materials of international quality, insisting that indigenous manufacturers should not be sidelined in favour of foreign suppliers.

“The Nigeria First Policy, reaffirmed by President Bola Ahmed Tinubu, has renewed confidence among domestic manufacturers. It builds on Executive Orders, which mandate government ministries and agencies to give preference to locally produced goods and services,” he noted.

While commending ongoing government efforts to upgrade infrastructure, the MAN chief warned that resorting to imports for the Lagos Airport project would undermine stated policies and deny the economy vital benefits such as youth employment, foreign exchange savings, and stronger national security through self-reliance.

He pointed out that in previous projects, Nigerian producers were overlooked despite MAN’s advocacy, with imported fencing materials supplied instead a development he described as discouraging to the nation’s industrial sector.

“This project presents a chance to correct past missteps and to prove that the Nigeria First Policy is more than a slogan. It should be demonstrated through consistent implementation,” Ajayi-Kadir said.

Reaffirming the association’s readiness to work with government in driving inclusive growth, he concluded by urging that the Lagos Airport fencing materials be sourced strictly from capable Nigerian manufacturers.

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Speaking at the 39th Annual General Meeting of MAN on Tuesday in Ogun State, Onafowokan, who also serves as the Managing Director of Coleman Wires and Cables Industries Limited, addressed the theme, “Dollar to Naira Cost, the Nigerian Manufacturers’ Daily Dilemma: Exploring Strategies for Business Sustainability.”

He highlighted the soaring exchange rate, which has surged to NGN1,900 to $1 by early 2024, as a key driver of the sector’s challenges.

“This policy move has caused a severe forex scarcity, making it nearly impossible for manufacturers to access affordable dollars for essential imports,” Onafowokan stated.

Due to the limited availability of forex at official rates, many manufacturers have turned to the parallel market, where rates have skyrocketed to NGN900 to $1, causing a significant rise in production costs. This increase has placed substantial financial strain on businesses that rely heavily on imported raw materials and machinery.

The economic impact has been substantial. Inflation has risen to 28.92 percent as of December 2023, and 16 major manufacturing firms are estimated to have incurred cumulative losses amounting to N792 billion.

Capacity utilization has plummeted, with inventories of unsold goods now valued at over N350 billion.

Onafowokan also highlighted the added burdens of inadequate infrastructure and rising energy costs.

He noted that key roadways in Ogun State, critical for transporting goods and materials, remain in disrepair, causing frequent accidents and increasing logistics expenses.

In addition, recent electricity tariff hikes by the Nigerian Electricity Regulatory Commission have further strained manufacturers’ operational budgets, squeezing already narrow profit margins.

He also called for a more efficient tax system and proposed a “Buy Made-in-Nigeria” initiative to stimulate local demand and provide much-needed support for the struggling sector.

Onafowokan’s recommendations underscore the urgent need for policy measures to support the manufacturing industry, which he emphasized as vital for Nigeria’s economic resilience and growth.

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