Bank credit to Nigeria’s manufacturing sector declined by N1.92 trillion in 2025, dropping from N8.53 trillion in December 2024 to N6.61 trillion by December 2025 — a contraction of 22.5 per cent that the Manufacturers Association of Nigeria has described as one of the most serious setbacks to the country’s industrialisation drive in recent years. MAN Director-General Segun Ajayi-Kadir warned that the trend, if left unaddressed, could trigger factory closures, accelerate job losses, worsen inflation, and undermine the government’s industrial policy ambitions.
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The scale of the shift
The N1.92 trillion decline makes manufacturing one of the worst-performing sectors for credit allocation in 2025, second only to the General Services sector which recorded a 25 per cent contraction. The contrast with other sectors is stark: while manufacturers received N6.61 trillion in bank credit by year end, the oil and gas sector attracted N10.59 trillion and the financial sector N9.24 trillion — reflecting a clear and deliberate reallocation of loanable funds toward sectors offering faster and less risky returns.
This reallocation is not accidental. Ajayi-Kadir identified the CBN’s Cash Reserve Ratio, which remains between 45 and 50 per cent for some commercial banks, as a structural constraint that significantly reduces the total volume of funds available for lending. With a large share of deposits locked away to meet CRR requirements, banks are operating with a constrained lending base and are directing what is available toward activities with predictable short-term returns.
A banking system that lends N10.59 trillion to oil and gas and N6.61 trillion to manufacturing is not allocating capital randomly. It is responding rationally to risk and return signals — and those signals are pointing banks away from the productive sector that creates the most jobs and the most industrial value.
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The cost of borrowing problem
Even where credit is technically available, the price at which manufacturers can access it has become prohibitive for most investment decisions. As of May 2026, average prime lending rates stood at 27 per cent, while maximum lending rates at some commercial banks reached 35.6 per cent — levels that Ajayi-Kadir described as making long-term capital expenditure financing almost impossible for most manufacturers.
The CBN has cut the Monetary Policy Rate twice since late 2025, bringing it to 26.5 per cent, but the reduction has not translated meaningfully into lower commercial lending rates. The suspension of the CBN’s development finance programmes, including the Real Sector Support Fund which previously offered manufacturers concessionary single-digit financing, has pushed more manufacturers into the commercial lending market at rates that erode the economic case for expansion.
The CBN cut rates. Banks did not follow. Manufacturers who needed single-digit concessionary finance and were promised a N1 trillion stabilisation fund are now navigating a 35 per cent lending environment with neither the support nor the fund.
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What needs to change
MAN has issued a clear set of demands: further reductions in the MPR, lower CRR requirements for banks that direct credit to manufacturers, expansion of the Bank of Industry’s capital base, immediate implementation of the N1 trillion Manufacturing Stabilisation Fund, government-backed loan guarantees for small and medium-scale manufacturers, and the refinancing of existing high-interest loans through intervention funds at single-digit rates.
For Nigerian SMEs in the manufacturing segment — the small processors, food producers, textile makers, and light manufacturers that are most dependent on bank credit for working capital and equipment — the N1.92 trillion decline is not a macro statistic. It is the aggregate of thousands of loan applications declined, expansion plans shelved, and production runs scaled back because the money needed to run them at full capacity is either unavailable or too expensive to justify borrowing.
