The Manufacturers Association of Nigeria has welcomed the Central Bank of Nigeria’s decision to cut the Monetary Policy Rate by 350 basis points, saying cheaper monetary conditions could improve access to working capital for manufacturers.
The Monetary Policy Committee reduced the benchmark rate from 26.5 per cent to 23 per cent and adjusted the Standing Facilities Corridor to plus 50 and minus 300 basis points around the MPR.
It retained the Cash Reserve Ratio at 45 per cent for deposit money banks and 16 per cent for merchant banks, while maintaining the liquidity ratio at 30 per cent.
MAN Director-General Segun Ajayi-Kadir described the rate reduction as a significant easing of monetary policy after an extended period of tight financial conditions.
He said lower policy rates could help manufacturers finance inventories, raw materials, production cycles, equipment and expansion if commercial lending rates respond accordingly.
However, MAN warned that the high CRR would continue to restrict the share of bank deposits available for lending to productive sectors.
The association said the impact of the MPR reduction would depend heavily on how quickly it translated into lower borrowing costs for businesses.
MAN also argued that interest-rate cuts alone would not resolve structural constraints facing manufacturers, including unreliable electricity, high logistics costs, insecurity and infrastructure deficits.
It called for stronger coordination between monetary and fiscal authorities and urged the CBN to expand concessionary single-digit financing for strategic manufacturers and small industrial businesses.
The association also asked for a gradual review of the CRR where macroeconomic conditions permit, as well as measures to ensure banks pass lower policy rates to domestic producers.
MAN further recommended stronger implementation of the Nigeria First Policy, greater domestic gas utilization, incentives for alternative energy and a transparent foreign-exchange window for manufacturers importing essential equipment and raw materials not available locally.
Ajayi-Kadir said future MPC decisions should pay greater attention to their effects on manufacturing and productivity.
