Manufacturers in Nigeria have expressed concern that expensive credit and rising production costs could undermine the recovery of the manufacturing sector, despite a renewed improvement in business confidence.
The concern was contained in the Manufacturers Association of Nigeria (MAN) Manufacturers’ CEOs Confidence Index (MCCI) for the second quarter of 2026 (Q2’26).
According to the report, access to finance remained the biggest challenge for manufacturers, with two out of every three CEOs identifying commercial bank lending rates as a major obstacle to productivity. The executives also said the amount of credit available to the sector was insufficient.
Manufacturers attributed the high borrowing costs partly to the Central Bank of Nigeria’s (CBN) Monetary Policy Rate (MPR), which stood at 26.5 per cent during the quarter.
They said the prevailing interest-rate environment had increased financing and production costs, making it more difficult for businesses to expand production, invest and create employment.
The report noted that although the MPR had been reduced and retained at 26.5 per cent, the rate was still considered too high to adequately support the financing requirements of the real sector.
Manufacturers also pointed to rising energy, transportation, distribution, shipping and raw material costs, alongside limited bank lending, as factors restricting productivity and capacity utilisation.
Other challenges highlighted in the report included frequent power outages, inadequate foreign exchange supply, shortages of raw materials, multiple taxation and poor government infrastructure.
Despite reforms in the foreign exchange market and relative stability of the naira, about 50 per cent of manufacturers surveyed said improved FX sourcing had not resulted in adequate access to foreign exchange for their businesses.
They said limited access to foreign exchange continued to affect their ability to operate at full capacity while increasing the cost of imported machinery and production inputs.
On infrastructure, only 27 per cent of manufacturing executives said government spending in the area was encouraging enough to support manufacturing activity, pointing to concerns about the slow impact of infrastructure investments on productivity.
The report also found that production, distribution and shipping expenses continued to rise during Q2’26, although manufacturers recorded a modest improvement in sales volumes.
However, overall confidence in the sector improved by 3.4 points, rising from 48.7 in Q1’26 to 52.1 in Q2’26. MAN said the increase was largely driven by expectations of improved business conditions rather than substantial changes in the current operating environment.
Manufacturers are more optimistic about the third quarter of 2026, projecting business conditions at 55.6, employment at 55.2, and production conditions at 63 points.
The Director General of MAN, Segun Ajayi-Kadir, said the expected improvement would depend heavily on effective policy implementation and efforts to reduce the cost of doing business.
He urged the CBN to lower the MPR to below 20 per cent, arguing that this would help stimulate manufacturing growth, make credit more affordable and improve access to foreign exchange for manufacturers.
Ajayi-Kadir stressed that reducing financing and production costs would be essential to turning the sector’s renewed confidence into increased output, investment and job creation.
Explaining the factors behind the improved confidence, particularly as the MCCI reached a two-year high, Ajayi-Kadir said the sector had experienced about two years of weak confidence, but manufacturers were now becoming more hopeful about the direction of government reforms.
He pointed to developments in the foreign exchange market and tax reforms, saying manufacturers expected the reforms to create a more stable economy and a tax system that encourages productivity.
However, he expressed concern over the proposed retroactive application of the tax law, warning that failure to resolve the issue could erode the confidence manufacturers have gained from the reforms.
