60% Interest Rates Threaten Survival of Nigeria's Manufacturing and Agriculture Sectors

 

Nigerian manufacturers and agricultural operators are grappling with crippling interest rates of up to 60 per cent on loans, according to the latest data on deposit and lending rates released by financial authorities.

This alarming development comes against the backdrop of the Central Bank of Nigeria's (CBN) sustained tight monetary policy, with the Monetary Policy Rate (MPR) held at 27 per cent as of late 2025 into early 2026. While the benchmark rate aims to curb inflation and stabilize the naira, commercial banks have passed on—and in some cases amplified—these costs, pushing effective lending rates far higher for risk-perceived sectors like manufacturing and agriculture.

Industry stakeholders report that formal bank loans to these sectors often carry rates in the 30-40% range, but when factoring in additional fees, collateral requirements, or informal lending (common in rural agric), the real cost can climb to 60% or more. This has led to reduced borrowing, slashed investments, and a slowdown in production capacity.

Manufacturers, already battling forex volatility, high energy costs, and import dependencies, have seen bank credit shrink significantly. Recent CBN figures indicate a drop in lending to the sector, with manufacturers cutting back on loans by trillions of naira in recent periods due to unaffordable rates.

In agriculture—Nigeria's largest employer and a critical driver of food security and non-oil exports—the impact is even more severe. Smallholder farmers and agribusinesses, often viewed as high-risk by banks, face limited access to formal credit and turn to expensive informal sources. This exacerbates post-harvest losses, low mechanization, and reliance on imports, despite government initiatives like the Agricultural Credit Guarantee Scheme Fund (ACGSF) aimed at easing burdens.

Experts warn that persistent high rates could stifle economic recovery, job creation, and diversification away from oil. A recent CBN survey showed over 65% of Nigerians favoring lower interest rates to support growth.

Calls are mounting for targeted interventions, such as expanded subsidies, risk-sharing facilities (e.g., via NIRSAL), or sector-specific lower-rate windows to revive productive activities.

As the CBN's Monetary Policy Committee prepares for its next meeting, stakeholders hope for signals of easing to provide relief to these vital sectors.