Nigerian manufacturers’ loans from tier-one banks soared to a five-year high as a result of naira devaluation.
Data from the Nigerian Exchange Group (NGX) show that loans to the manufacturing sector by the country’s top-tier banks increased to N6.4 trillion in 2024, representing a 218.4 percent year-on-year increase, and the highest level since 2020 when the total stood at N2.06 trillion.
The banks in focus are: Access Holding Plc, Zenith Bank, First Holding Plc, Guaranty Trust Holding Company Plc (GTCO), and United Bank of Africa (UBA).
Experts attribute the surging naira loans to currency devaluation. The naira has lost over 60 percent of its value since the Central Bank of Nigeria (CBN) floated the currency in 2023, triggering exchange rate volatility that has hit import-dependent manufacturers hard. As of May 2025, the naira traded at over N1,500 to the dollar, compared to N600 in early 2023.
Tier one banks’ loans to manufacturers rose from N2.06 trillion in 2020 to N2.56 trillion in 2021 and further to N3.4 trillion in 2022. It hit N4.6 trillion in 2023 before skyrocketing to N6.4 trillion in 2024.
“The trend clearly shows that the significant uptick in loan values began with the currency devaluation, not necessarily because of stronger lending appetite,” said Nabila Mohammed, a banking analyst at Chapel Hill Denham.
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According to Mohammed, many of the loans were initially issued in dollar terms. Due to the naira’s depreciation, converting those dollar-denominated loans to naira at today’s rates creates the illusion of massive credit growth. “It’s mostly a valuation effect,” she said.
A Lagos-based analyst, who pleaded anonymity, said it might look like loans are growing, but the rise in credit is mostly due to FX movements.
“It’s not real growth, just a result of currency depreciation,” the analyst said.
Loan restructuring option
Manufacturers are now contending with heightened repayment pressures. Interest rate hikes have compounded the burden, pushing many to seek loan restructuring options.
The situation has been described as a battle for survival rather than growth.
“The surge in credit uptake is largely driven by the need to survive rather than expand,” said Segun Ajayi-Kadir, director general of the Manufacturers Association of Nigeria (MAN). “Manufacturers are borrowing to cover working capital, pay salaries, and import raw materials, and not to scale operations.”
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Soaring costs
With the CBN maintaining a tight monetary stance, Nigeria’s benchmark interest rate climbed to 27.5 percent in May 2025. BusinessDay reported that the maximum borrowing costs to manufacturers across 10 major banks surged by 98 percentage points between February 2021 and February 2025.
Nigerian consumer goods firms are grappling with soaring finance costs, which surged by 56 percent to N811.7 billion last year.
Champion Breweries recorded the highest finance cost growth of 529.4 percent; Guinness Nigeria reported 197.5 percent; Nestle Nigeria, 68.22 percent growth; Dangote Sugar Refinery, 49.4 percent growth; and BUA Foods, 14.9 percent growth.
“Why would manufacturers borrow at 35 percent for long-term projects? It’s simply unsustainable. Most will either wait for rates to fall or look to capital markets instead,” Mohammed noted.
Data from the fourth quarter GDP report shows that growth in the manufacturing sector saw a marginal decline of 0.02 percent from a 1.40 percent growth rate recorded in 2023 to 1.38 percent in 2024.
The sector’s contribution to the country’s gross domestic product for the period also declined marginally to 8.21 percent in 2024 from 8.64 percent recorded in the previous year.
The MAN DG pointed out during the BusinessDay Manufacturing conference that, “despite facing a challenging macroeconomic environment and the ongoing depreciation of the naira, our sector generated over $6.72 billion through manufactured exports in 2019, and while export earnings dipped to $1.51 billion in 2024, it successfully attracted $1.59 billion in foreign investment in 2023.”
