The Manufacturers Association of Nigeria (MAN) has issued a strong warning about the negative implications of the recent increase in the Monetary Policy Rate (MPR) to 27.25 percent.
In a statement released on Thursday, Segun Ajayi-Kadir, the Director General of MAN, expressed concerns about the far-reaching impact of this decision on the manufacturing sector.
Ajayi-Kadir highlighted that the continued rise in interest rates, which now totals 15.75 percentage points since May 2022, would exacerbate the challenges faced by manufacturers. The sector is already grappling with rising production costs, declining consumer purchasing power, and a challenging operating environment.
Ajayi-Kadir said, “The decision to raise the MPR to 27.25 per cent has far-reaching implications for the manufacturing sector in Nigeria. The continued increase in interest rates, which now totals 15.75 percentage points since May 2022, would compound the challenges faced by the sector, including rising production costs in the face of declining consumer purchasing power.
“With the increase in borrowing costs, manufacturers will now pay over 35% on their credit facilities. Clearly, this will lead to an increase in production costs, higher prices of finished goods, lower competitiveness and production capacity expansion.”
The increase in borrowing costs will have a direct impact on manufacturers, forcing them to pay over 35 percent on their credit facilities. This will inevitably lead to higher production costs, which will be passed on to consumers in the form of increased prices for finished goods. As a result, Nigerian manufacturers will face reduced competitiveness in both domestic and international markets.
Furthermore, the higher interest rates will make it more difficult for manufacturers to access financing for capital investment and expansion. This will limit their ability to invest in new equipment, technology, and facilities, hindering their growth and development.
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The MAN’s statement serves as a stark reminder of the challenges facing the manufacturing sector in Nigeria. The continued increase in interest rates poses a significant threat to the sector’s viability and competitiveness. Unless the government takes steps to address these challenges, the manufacturing sector may face a bleak future.
Key Points from the MAN Statement:
Negative Impact on Manufacturing: The increase in MPR will exacerbate the challenges faced by the manufacturing sector.
Rising Borrowing Costs: Manufacturers will pay over 35 percent on their credit facilities.
Higher Production Costs: Increased borrowing costs will lead to higher production costs and prices for finished goods.
Reduced Competitiveness: Manufacturers will face lower competitiveness in domestic and international markets.
Limited Expansion: Higher interest rates will hinder manufacturers’ ability to invest in capital and expand their operations.
The MAN’s statement highlights the urgent need for government intervention to support the manufacturing sector. By addressing the challenges posed by rising interest rates and creating a more conducive business environment, the government can help to ensure the long-term sustainability and growth of this vital industry.
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