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Manufacturing companies in Nigeria successfully reduced their debt burden by N1.62 trillion between February and June 2024, according to data from the Central Bank of Nigeria’s statistical bulletin on sectoral distribution of credit by Deposit Money Banks.
This reduction reflects a significant 14.85% decline in manufacturing loans, occurring in the context of rising interest rates that have elevated borrowing costs across the economy.
In February 2024, total credit allocated to Nigeria’s manufacturing sector reached N10.88 trillion, up by N860 billion from N10.02 trillion in January. However, by June 2024, this figure had declined to N9.26 trillion, reflecting a reduction of N1.62 trillion.
This decrease highlights the sector’s challenges in coping with increased financial costs due to the Central Bank of Nigeria’s rate hikes, underscoring the significant impact of monetary tightening on business operations.
The first interest rate hike under the current CBN Governor, Olayemi Cardoso, was introduced in February 2024, setting a tone for stringent monetary policies to curb inflation.
The total credit to the private sector across all industries experienced a significant contraction during the same period.
In February 2024, private sector loans were reported at N61.56 trillion, but this figure decreased to N55.71 trillion by June 2024, reflecting a decline of N5.84 trillion.
This trend reflects broader financial tightening across industries, as cumulative rate increases have restricted loan accessibility.
In February, manufacturing loans constituted 17.68% of total private sector credit, with N10.88 trillion out of N61.56 trillion.
By June, this share had decreased slightly to 16.63%, with N9.26 trillion out of N55.71 trillion.
These figures indicate that while manufacturing firms remain significant borrowers, they have reduced their borrowing in response to tougher conditions.
The CBN’s decision to raise interest rates in February 2024, aimed at curbing inflation, has substantially reshaped the borrowing landscape for businesses.
The CBN, under the leadership of Olayemi Cardoso, has raised the monetary policy rate five times to combat inflation and promote economic stability.
The initial hike increased the rate from 18.75% to 22.75%, followed by subsequent increases to 24.75%, 26.25%, and 26.75%.
Most recently, in September 2024, the Monetary Policy Committee (MPC) raised the rate by 50 basis points to 27.25%.
