FG, manufacturers seek lower lending costs for production

The Minister of State for Industry, Senator John Enoh.

The Federal Government and manufacturers have set plans in motion to reduce high lending costs and eliminate the financing conditions that make local production less attractive than importing goods.

This comes as stakeholders comprising manufacturers, government agencies, development finance institutions and commercial banks commit to the Lagos Industrial Finance Compact.

They committed to the pact at the Ministerial Roundtable 2 organised by the Industrial Revolution Work Group in Lagos on Friday.

The roundtable, themed ‘From Policy to Production: Financing Nigeria’s Industrial Take-off,’ focused on translating industrial policy into practical financing instruments that can provide manufacturers with affordable and long-term capital.

Speaking at the event, the Minister of State for Industry, Sen. John Enoh, said manufacturers faced limited access to capital, worsened by the high cost and short tenor of available financing.

Enoh described the situation: “If you’re borrowing capital at, let’s say, 30 per cent, and the businessman finds it more profitable to just go and import a container, and then get the money, it’s a disincentive towards production and towards manufacturing.”

He said the Federal Government wanted the roundtable to produce concrete financing instruments with clearly assigned responsibilities and deadlines rather than another set of policy statements.

“We’re still having ongoing conversations which will lead to instruments that can finance Nigeria’s industrial growth. I mean, these discussions just remain as sentiments. That financing is not yet there, and there is no impact on manufacturing,” the minister said.

He added that stakeholders would commit to specific responsibilities under timelines of 30, 60 and 90 days, with the Industrial Revolution Work Group expected to monitor implementation.

Enoh affirmed that the high cost of capital had contributed to the decline in manufacturing’s contribution to the economy, noting that the sector accounted for more than 20 per cent of economic output in the early 1990s but had remained around seven to nine per cent for more than a decade.

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Representing the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, the Special Adviser on Investments, Marie Ukpere, said manufacturing grew by 3.29 per cent year-on-year in the first quarter of 2026 before recording further growth in the second quarter.

She cited the Manufacturers Association of Nigeria’s Chief Executive Officer Confidence Index, which rose to 52.1 points in the second quarter from 48.7 points in the first quarter, its highest level in more than two years.

However, Ukpere said commercial bank credit to manufacturers fell by about N1.9tn in 2025, from N8.5tn to N6.61tn, representing a decline of more than 22 per cent.

She said manufacturers also borrowed at prime rates averaging about 27 per cent, with some rates reaching the mid-30 per cent range, making long-term investments in factories, production lines and retooling difficult to finance.

Ukpere said, “For a business planning a seven-, 10, or 15-year investment horizon, a new production line, a factory expansion, a retooling, this is simply not the financing environment that supports patient and productive capital.”

She said the government needed to bring fiscal, monetary and industrial policies together to ensure that existing financing incentives and development funds reached manufacturers.

Ukpere said, “An inaccessible tax incentive, a guaranteed scheme manufacturers have never heard of, or a development fund that never disburses, has the same outcome as no policy at all.”

She said the proposed industrial finance compact should identify existing financing instruments that manufacturers underuse, determine whether pricing, tenor, collateral or administrative processes create bottlenecks, and mobilise public and institutional capital alongside commercial lending.

Ukpere said the success of the initiative would ultimately depend on whether manufacturers in industrial hubs such as Aba, Kano and Ogun could access financing windows and deploy the funds to expand production, create jobs and increase exports.