Manufacturers are rattled that banks lend finance at over 20 per cent interest, a development that has crippled business growth in the sector.
Recently, the Central Bank of Nigeria (CBN) raised the Monetary Policy Rate (MPR), which is the interest rate benchmark for lending by 200 basis points – from 12 percent to 14 percent.
The latest development further pushed up banks’ interest rates to above 20 per cent, a rate which the Kaduna State Governor, Nasir el-Rufai, recently said only drug dealers and traders can afford to do business with.
The Manufactures Association of Nigeria (MAN) is worried that the issue of funding remains a challenge to the manufacturing sector and commercial banks are currently not helping matters.
The President of MAN, Dr Jacobs Udemba, said the current situation where manufacturers pay double digit interest rate is not manufacturing-friendly.
“The banks are not manufacturing friendly as their interest rates are usually very high and therefore remain a major challenge to the sector,” he said.
Udemba also faulted the recent lending rate framework of the Bank of Industry (BOI) because the framework only financed machinery acquisition and did not cater for working capital.
“This notwithstanding, MAN is pleased with Bank of Industry for funding of machinery, even though there is need for improvement,” he had said.
As a way out, MAN wants government to pay attention to the manufacturing sector and continue to play its role as wealth and employment generator.
“Government should continue to consult manufacturers especially on policy issues,” the president said.
The Director General of the Kaduna Chamber of Commerce, Industry, Mines and Agriculture, Alhaji Usman Saulawa, while reacting to the development said the increase in the lending rate would impact negatively on production cost and the cost, translating into increase in locally manufactured products.
“The major problem of manufacturers is that the increase in interest rate will definitely bring about increase in cost of borrowing which will in turn increase production cost,” he said.
This is coming just as the gas using members of the Manufacturers Association f Nigeria (MAN) said they will be forced to shut their operations because of persistent increase in price of natural gas.
The president of the group, Dr Michael Ola Adebayo said: “The price of gas in Nigeria is now far higher than the international price which is at an average $2.5. In Nigeria, the average price is currently $7.65 per standard cubic metre (scm).
“They (franchisers) are threatening to cut supply and I can assure you that if that happens, we will have no other option but to shut, too, because the factors that go into production must be equitable for us to compete.”
The group said the Shell Petroleum sold gas to the Nigerian Gas Company (NGC) at about 9 cents but the NGC used to sell to the franchisers at $2 while they, in turn, sold to the manufacturers at $7.38.