MAN: MPR Cut Will Support Manufacturers’ Capacity to Finance Inventory, Raw Materials

Dike Onwuamaeze

The Manufacturers Association of Nigeria (MAN) declared that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) reduction of the Monetary Policy Rate (MPR) will support manufacturers’ capacity to finance inventory, raw materials, production cycles, equipment acquisition, and business expansion.

Aside from slashing the MPR by 350 basis points to 23 per cent from 26.50 per cent, other decisions of the MPC included the adjustment of the Standing Facilities Corridor (SFC) to +50 / -300 basis points around the MPR; retaining the Cash Reserve Ratio (CRR) at 45 per cent for deposit money banks and 16 per cent for merchant banks and retaining the liquidity ratio at 30 per cent.

While commending the CBN for lowering the MPR, which it described as “a significant easing of the monetary policy stance,” it explained that the move is expected to lower the borrowing cost and improve the operating environment for businesses, particularly manufacturers whose activities depend heavily on working capital and investment financing.

Director General of MAN, Mr. Segun Ajayi-Kadir, stated this yesterday in a public statement on the position of MAN on the September 2026 MPC meeting.

Ajayi-Kadir said that the reduction signalled a gradual shift from the exceptionally tight monetary conditions that have prevailed in recent periods that contributed to poor performance of the manufacturing sector.

He also said that the revised SFC of +50/-300 basis points provided a more moderate framework around the policy rate, and would improve liquidity management within the banking system and support more efficient pricing of short-term funds.

However, the director general stated that “retaining the CRR at 45 per cent for deposit money banks and 16 per cent for merchant banks means that a substantial proportion of banks’ deposits will continue to be held as reserves.

“While reserve requirements remain important for financial and monetary stability, the relatively high CRR may continue to constrain the proportion of deposits available for lending to productive sectors,” it stated.

The MAN added that the benefits of the MPR reduction may not be fully realised if credit expansion to the real sector remains constrained because of the high CRR rate that reduces the available funds for lending or investment.

According to the organisation, the extent manufacturers would benefit from the reduced MPR would depend on the speed and strength of monetary policy transmission to actual lending rates and complementary fiscal and structural interventions, including reliable electricity supply, reduced logistics costs, smooth road infrastructure and favourable ease of doing business.

It said: “Broadly, MAN sees the MPR reduction as a good opportunity to create a more supportive financing environment for manufacturing.

“Yet, more cuts are needed to achieve meaningful impact. Nevertheless, lower interest rates alone cannot resolve the structural constraints that continue to raise production costs.

“Therefore, MAN advocates for stronger coordination between monetary and fiscal authorities to ensure that monetary policy easing is complemented by targeted fiscal and structural interventions.

“Such coordination is necessary to translate the reduction in the policy rate into lower lending costs, improved access to credit, increased productive investment, an improved operating environment, and stronger industrial growth.”

The association also highlighted that the MPR cut would lead to a downward shift in fixed income yields on short term government security like treasury bills and Open Market Operations (OMO); reduce debt-servicing borrowing costs for the federal government and slightly narrow the yield spread for foreign portfolio investors looking for opportunities.

MAN, therefore, recommended the following policy measures for the government’s consideration to support sustainable economic growth and industrial development.

It recommended that the CBN should expand access to concessionary, single-digit financing for manufacturers, particularly SMIs and businesses operating in strategic sectors.

“Progressively review the high CRR for deposit money banks, where prevailing macroeconomic conditions permit, to create greater lending capacity for productive sectors while safeguarding financial-system stability.

“Partner with deposit money banks (DMBs) and the Bankers’ Committee to ensure that the 350 bps MPR reduction translates directly into lower prime and maximum commercial lending rates for local manufacturers,” it noted.

MAN also urged the government to “intensify efforts to address structural production constraints, particularly electricity costs, transport and logistics expenses, infrastructure deficits and insecurity, which continue to increase the cost of manufacturing.

“Strengthen interventions aimed at reducing industrial energy costs through improved electricity supply, greater domestic gas utilisation and incentives for alternative and renewable energy solutions for industrial users.

“Accelerate the implementation of the Nigeria First Policy to strengthen domestic value chains, promote local sourcing of raw materials, reduce import dependence and create stronger demand for locally manufactured goods.”

Ajayi-Kadir called for the utilisation of the growing external reserves buffer to create a dedicated, transparent foreign exchange window for legitimate manufacturers importing capital equipment and necessary raw materials that are not locally available, and minimise dependency on parallel market premiums.

He said that the central bank should ensure that future MPC meetings are heavily focused on the outcome of an impact assessment of the MPR on the manufacturing and productive sectors.

“The critical issue should remain accelerating the pace of improving productivity,” Ajayi-Kadir said.