Manufacturers beg FG to reduce interest rate to 1%, say businesses are dying

Nigerian manufacturers have begged the Federal Government to reduce the interest rate on loans to 1%.

Bioku Rahman, the outgoing chairman of the Manufacturers Association of Nigeria (MAN) for Kwara and Kogi, made the appeal on Tuesday in Ilorin, Kwara state, during the association’s 10th annual general meeting (AGM).

The meeting was themed ‘Tackling the Challenges of the Manufacturing Sector: A Win-Win For Government and Local Manufacturers’.

On July 23, the Central Bank of Nigeria (CBN) raised the monetary policy rate (MPR), which benchmarks interest rates, to 26.75 percent — from 26.25 percent.

In its second quarter (Q2) ’24 MAN CEO’s Confidence Index (MCCI),’ MAN said commercial banks charge an average maximum lending rate of 35 percent on loans to its members between April and June.

Speaking at the AGM, Rahman said the present “interest rates are killing businesses”.

“We therefore ask the federal government to urgently direct the CBN to drastically reduce interest rates on industrial loans,” he said.

“The CBN should also direct commercial banks to reduce interest rates on industrial loans.

“The interest rates charged on industrial loans and other loans released as COVID-19 palliatives should be significantly reduced further to one percent.”

Also, Rahman asked the CBN to waive conditions on foreign exchange (FX) policies for local manufacturers.

“Similarly, CBN can widen the window of foreign exchange to local industries, while urging the federal government to harmonise taxes and levies at federal, state and local government levels.”

He also urged the Bank of Industry (BOI) to approve and urgently roll out further reductions in its lending rates to industries.

Rahman added that a heavy-duty gas-energy generation and distribution plant was exclusively needed for Kwara industrialists.

On her part, Damilola Adelodun, Kwara state commissioner for Business, innovation and technology, said the government will continue to support the association to boost the state’s economy.

In a related development, Nigerian businesses and households expect the inflation rate to rise in the next one to six months.

This is according to the CBN’s July Inflation Expectations Survey Report released on Tuesday.

The survey showed that respondents expect inflation to rise in the review months with indices of 37.4 for the next month, -26.3 for the next two months and -15.8 for the next six months.

However, the report showed respondents expect the inflation rate to gradually reduce over the next six months.

A further analysis indicated that businesses anticipate that the inflation rate will drop compared to households, with indices of -33.4 and -11.0 points for the next month and next six months respectively.

“Overall, both businesses and households believe that the inflation rate will rise further in the periods”, the survey stated.

It added that the expected inflation rate hike will be driven primarily by changes in energy prices, exchange rates and transportation costs.

The reports come weeks after Nigeria’s inflation declined to 33.40 percent in July, from 34.19 percent in June.

In the past months, the apex bank had continued to tighten Monetary policy measures such as the interest rate which stood at 26.75 percent to tame the inflation rate.