Banks are consistently starving Nigerian manufacturers of funds needed to retool their factories as data show that the average borrowing rate by real sector players in 2017 was 22.8 percent.
This represents 0.4 percentage point increase from 22.4 percent recorded in 2016, latest economic review by the Manufacturers Association of Nigeria (MAN) shows.
The review also shows that banks’ average lending rate to manufacturers was 22.65 percent in the first half (H1) of 2017 as against 21.4 percent charged in the corresponding half of 2016.
Similarly, banks lent to manufacturers at the rate of 23.05 percent in the second half of 2017, which was almost the same figure of 23.3 percent recorded in the corresponding period of 2016.
“It is important to fast-track the recapitalisation of the Bank of Industry (BoI) to enable it to meet up with huge credit demands of the industrial sector,” MAN opines.
“It is critical to intensify the implementation of the Moveable Collateral Registry and Credit Reporting system which were recently passed into law,” MAN says.
According to the manufacturing body, government now needs to open up access to various development funds created by the Central Bank of Nigeria (CBN) such as the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) and the N300 billion Real Sector Support Facility (RSSF) by relaxing stringent conditions denying manufacturers access to these funding windows.
Nigerian manufacturers are hard hit by high cost and short tenor of funds in the country, which are clogging the wheel of factory expansion across the country. The government-led DBN is yet to start operations several months after conception.
Development banks such as the BoI and the Bank of Agriculture (BoA) provide funds at nine percent interest rate to manufacturers and SMEs, but they are hobbled by shortage of funds in the face of high demand.
Frank Jacobs, president of MAN, believes that only a single-digit rate of five percent can revive the sector, which has been badly hit by policy flip-flops and poor infrastructure.
Financial experts, however, say that it is impossible for banks to lend at rates below the Monetary Policy Rate (MPR) set by the CBN. MPR, which is the benchmark lending rate, is currently at 14 percent.
Manufacturers say no country can ever attain industrial development without having specialised funding schemes that make cheap finance easily available for industries.
According to Babatunde Paul Ruwase, president of the Lagos Chamber of Commerce and Industry (LCCI), Nigeria needs a framework that will cut cost of funds for domestic investors.
“With commercial banks’ lending rate at between 20 and 35 percent, depending on the borrower and other factors, it is difficult by the private sector, especially SMEs, to successfully access funds.
“We note the efforts of government through the CBN and the BoI to extend intervention funds to operators. However, the range of beneficiaries and economic-wide impact remain very low,” Ruwase said at the State of the Nation address held by the chamber in Lagos recently.
