Nigeria’s manufacturing sector is coming under renewed pressure as high interest rates and declining access to bank credit threaten fresh investments in factories, production lines and industrial expansion.
The Federal Government said manufacturers are currently borrowing at interest rates averaging about 27 per cent, with some facilities priced in the mid-30 per cent range, making it increasingly difficult for businesses to finance long-term productive investments.
The warning was issued at a ministerial roundtable organised by the Industrial Revolution Work Group in Lagos, where government agencies, manufacturers, development finance institutions and commercial banks agreed to a new Lagos Industrial Finance Compact.
The compact is intended to develop cheaper and longer-term financing instruments that can support domestic production and make manufacturing more competitive with imported goods.
The roundtable, themed ‘From Policy to Production: Financing Nigeria’s Industrial Take-off’, brought together key stakeholders to address the persistent financing constraints confronting the sector.
Speaking at the meeting, the Minister of State for Industry, Senator John Enoh, said the combination of expensive credit and short repayment periods was discouraging investment in manufacturing.
Enoh said businesses could find importing goods more attractive than producing them locally when faced with borrowing costs of about 30 per cent.
“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.
According to him, the government wants the initiative to move beyond policy declarations and produce concrete financing instruments with clearly defined responsibilities and implementation deadlines.
“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,” Enoh said.
He disclosed that participating stakeholders would be assigned specific responsibilities to be implemented within 30-, 60- and 90-day timelines, while the Industrial Revolution Work Group would monitor progress.
Enoh also linked the high cost of capital to the long-term decline in the contribution of manufacturing to Nigeria’s economy.
He noted that manufacturing accounted for more than 20 per cent of economic output in the early 1990s but had remained within the range of seven to nine per cent for more than a decade.
Meanwhile, the Special Adviser on Investments to the Minister of Finance and Coordinating Minister of the Economy, Marie Ukpere, said there were signs of recovery in the sector despite the financing challenges.
Representing Minister Taiwo Oyedele, Ukpere said manufacturing grew by 3.29 per cent year-on-year in the first quarter of 2026 and recorded further growth in the second quarter.
She also cited the Manufacturers Association of Nigeria’s Chief Executive Officer Confidence Index, which climbed to 52.1 points in the second quarter from 48.7 points in the first quarter, representing its highest level in more than two years.
Despite the improvement, Ukpere disclosed that commercial bank lending to manufacturers dropped sharply by about N1.9 trillion in 2025.
She said credit to the sector declined from N8.5 trillion to N6.61 trillion, representing a fall of more than 22 per cent.
Ukpere said the cost of borrowing had further weakened manufacturers' ability to undertake long-term investments, with prime lending rates averaging about 27 per cent and some facilities attracting rates in the mid-30 per cent range.
“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.
She argued that Nigeria needed closer coordination between fiscal, monetary and industrial policies to ensure that existing incentives and development finance actually reached manufacturers.
“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,” Ukpere said.
She said the proposed industrial finance compact would review existing financing programmes that manufacturers were not adequately accessing and identify whether pricing, loan tenor, collateral requirements or administrative procedures were responsible for the bottlenecks.
The initiative would also seek to mobilise public and institutional funds alongside commercial bank lending to expand the pool of capital available to manufacturers.
Ukpere said the ultimate test of the compact would be whether businesses operating in major industrial centres such as Aba, Kano and Ogun could access the financing windows and use the funds to expand production, create jobs and increase Nigeria’s export capacity.
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