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Nigerian Manufacturers’ Debt to Banks Surges to N6.98 Trillion in June 2023

CBN Report Shows Increased Borrowing by Manufacturers

The Central Bank of Nigeria (CBN) has released its Sectoral Analysis of Deposit Money Banks’ Credit report, which shows that the debt owed by manufacturers to banks in the country has risen from N5.56 trillion in January 2023 to N6.98 trillion by June 2023. This means that manufacturers borrowed an additional N1.42 trillion within the first half of the year, representing a 25.54% increase.

The report also indicates that banks’ credit to the manufacturing sector increased by 52.08% in one year, from N4.53 trillion in June 2022 to N6.98 trillion in June 2023. The manufacturing sector received the largest share of the credit from banks during the review period, followed by the oil and gas sector with N5.18 trillion, and the general commerce sector with N2.39 trillion.

High Interest Rate and Inflation Affecting Manufacturers

The CBN report comes at a time when the apex bank has been raising the benchmark interest rate from 11.5% earlier in the year to 18.75% in June 2023, as part of its strategies to curb inflation and reduce liquidity in the economy. The CBN has increased the interest rate eight times consecutively since November 2022, citing the need to balance price stability and growth.

Nigerian Manufacturers’ Debt to Banks Surges to N6.98 Trillion in June 2023

However, stakeholders in the manufacturing sector have argued that the high interest rate is detrimental to the sector, as it increases the cost of production and reduces the competitiveness of local products. They have also lamented the high inflation rate, which stood at 17.75% in June 2023, according to the National Bureau of Statistics. The inflation rate has been above the CBN’s target range of 6-9% for over five years, eroding the purchasing power of consumers and affecting the demand for manufactured goods.

Government’s Commitment to Boost Private Sector Credit

Despite the challenges faced by the manufacturing sector, the government has reiterated its commitment to increase credit to the private sector, especially the small and medium enterprises (SMEs) that are the backbone of the economy. In the recently released Medium-Term Expenditure Framework and Fiscal Strategy Paper, the government stated that it plans to achieve a higher level of growth driven by the private sector.

The document also projected that the net domestic credit would increase over the period, while the credit to the government would decrease due to the expected reduction in fiscal deficits arising from the removal of fuel subsidy. The government also expressed its intention to continue to implement policies and reforms that would enhance the business environment and facilitate access to finance for the private sector.

Farmers’ Debt to Banks Declines in June 2023

In contrast to the manufacturers, the farmers in the country saw their debt to banks decline from N1.85 trillion in January 2023 to N1.83 trillion in June 2023, according to the CBN report. This suggests a lower appetite for loans among the farmers, who have also been affected by the high interest rate and inflation, as well as other factors such as insecurity, climate change, and poor infrastructure.

The Chairman of the All Farmers Association of Nigeria, Salihu Imam, had earlier called for a reduction in the lending rate to two per cent, saying that it was a necessity for the growth of the agricultural sector. He said that farmers were the backbone of the nation, and affordable loans were the fuel that propelled them forward. He also urged the government to provide more support and incentives to the farmers, who contribute to the food security and economic stability of the country.

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