The Central Bank of Nigeria (CBN) has revealed that the outstanding debt owed by manufacturers to banks in the country surged from N5.56 trillion in January 2023 to N6.98 trillion by June 2023.
The CBN’s Sectoral Analysis of Deposit Money Banks’ Credit report further discloses that manufacturers sought an additional N1.42 trillion in loans during the first half of 2023.
In a span of one year, banks’ credit to the manufacturing sector witnessed substantial growth, escalating from N4.53 trillion in June 2022 to N6.98 trillion in June of the current year.
An examination of monthly lending figures exhibited the following progression: N5.56 trillion in January, N5.57 trillion in February, N5.65 trillion in March, N5.81 trillion in April, N5.70 trillion in May, and a notable peak at N6.98 trillion in June 2023.
CBN’s Interest Rate Policy and Its Implications for Manufacturers
It is essential to highlight that the Monetary Policy Committee of the CBN raised the benchmark interest rate from 11.5% earlier in the year to 18.75% in June. This decision was part of a series of eight consecutive rate hikes aimed at containing inflation and reducing liquidity in the economy.
With the mounting debt levels, stakeholders in the manufacturing sector have persistently argued that the current double-digit lending rate is unfavorable, as it directly influences the cost of production and the competitiveness of the sector.
The report also elaborates, “The projection for Net Domestic Credit, although on an upward trajectory, reflects the expected credit dynamics in the economy. Credit to the Government is anticipated to decrease over the period due to the expected significant reduction in fiscal deficits resulting from the removal of fuel subsidies. In contrast, credit to the private sector is expected to increase, aligning with the government’s plan to achieve higher growth driven by the private sector.”
In contrast, borrowing by farmers to fund agricultural activities declined to N1.83 trillion in June from the N1.85 trillion recorded in January, indicating a decrease in the appetite for loans in the agricultural sector.
