Manufacturing confidence rises despite high credit costs

Manufacturing confidence in Nigeria improved in the second quarter of 2026, but high borrowing costs and rising production expenses continue to weigh on the sector.

The Manufacturers Association of Nigeria (MAN) disclosed this in its Manufacturers’ CEOs Confidence Index (MCCI) for Q2 2026. Although executives reported stronger optimism, they identified limited access to affordable finance as their biggest challenge.

Two out of every three manufacturing CEOs said commercial bank lending rates were discouraging productivity. They also said the amount of credit available to manufacturers remained inadequate.

Manufacturers linked the high cost of borrowing 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 rate remained too high for the financing needs of the real sector, despite having been reduced and maintained at that level.

The manufacturers warned that expensive credit was pushing up production costs and limiting their ability to expand operations, invest in new capacity and create jobs.

“Two in every three CEOs cited commercial bank lending rates as a disincentive to manufacturing productivity,” the report stated, stressing that the cost of credit directly influences production costs.

Manufacturers also identified several other problems affecting their businesses, including:

• Frequent power outages
• Inadequate foreign exchange supply
• High production costs
• Shortages of raw materials
• Multiple taxation
• Poor government infrastructure
• Rising energy, distribution and shipping expenses

Foreign exchange access remained another concern. Despite reforms in the forex market and relative stability in the naira, about half of the manufacturers surveyed said improved forex sourcing had not resulted in enough foreign currency for their operations.

They said limited access to forex continued to prevent companies from operating at full capacity while increasing the cost of imported machinery and production inputs.

Infrastructure also remained a concern. Only 27 per cent of manufacturing executives said government spending on infrastructure was encouraging for manufacturing activity. The figure reflected concerns about the slow effect of public infrastructure projects on productivity.

Despite these difficulties, the manufacturing confidence index increased by 3.4 points, rising from 48.7 in Q1 2026 to 52.1 in Q2 2026. MAN said the improvement largely reflected expectations of better business conditions rather than a major improvement in manufacturers’ current operating environment.

Manufacturers were more positive about the third quarter, forecasting business conditions at 55.6, employment at 55.2 and production conditions at 63 points.

MAN Director General Segun Ajayi-Kadir said the expected improvement would depend heavily on government policy implementation and efforts to reduce the cost of doing business.

He urged the CBN to cut the MPR to below 20 per cent to support manufacturing growth and make credit more affordable. He also called for priority access to foreign exchange for manufacturers.

“Reducing financing and production costs was critical to converting the renewed confidence among manufacturers into actual increases in output, investment and employment,” he stressed.

Speaking about the factors behind the renewed optimism, Ajayi-Kadir said manufacturers were responding mainly to expectations that government reforms would begin to produce stronger results.

“What has happened in the past is that for two years we have witnessed a lull in terms of how confident manufacturers are. But what we are seeing now is that there’s a departure and it is based not on the experience of real improvement in their condition but in the expectation and that’s based on the fact that we believe that government will follow through on some of its reform measures that are beginning to stabilize the economy.

“For instance, the exchange rate, the tax reform has given hope that we are now going to have a tax system that supports productivity and actually incentivizes it. Even though we currently have a setback that the law is going to take a retroactive effect, we hope that this is resolved otherwise it will just wipe off the confidence that we have in that area.”

The latest figures suggest that manufacturing confidence is recovering, but manufacturers remain focused on whether promised reforms will translate into lower costs, better infrastructure and easier access to finance.

Do you think lower interest rates and cheaper production costs can turn manufacturers’ renewed optimism into stronger economic growth?