Exit of Nigerian manufacturing firms necessitates policy review 

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The number of manufacturing companies silently shutting down or exiting Nigeria is rising by the day, underlining the need for a comprehensive review of some of the policies guiding this sector. Recently, Grif, maker of aluminium drums, exited Nigeria because the company could not get annealed cold-rolled steel which was its key raw material. The…

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How poor access to cheap credit affects manufacturers

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James Obi, a 35-year-old medium-scale manufacturer, makes paints in Ikeja, Lagos. Due to the need to expand his business, he proceeded to request a loan of N10 million from one of Nigeria’s tier- two lenders.

The bank demanded collateral that would cover the amount he needed. The interest rate was 24 percent and the money must be returned in 12 months.

After analysing the requirements, he could not proceed. This left him in a fix and made him lose an opportunity to meet supply needs.

Manufacturers, especially SMEs, are increasingly facing frustration in the hands of deposit money banks.

Lending rate to the manufacturing sector averaged 22.21 percent in 2018 and 22.84 percent in 2017, according to the Manufacturers Association of Nigeria (MAN).

“I am encouraged to expand my business, but my inability to access loans has made it almost impossible and even banks are not helping matters with the high interest rate and the difficult requirements,” Komolafe Abisola, CEO of K-BIS Bags, said in an interview.

According to MAN CEO’s Confidence Index report for Q1 2019, high interest rate as well as difficulty in accessing loans ranked 3rd place in the list of challenges facing Nigerian manufacturers. The constrained access to loans has hindered the prospects businesses have to offer, especially in terms of expansion and growth.

Following responses given by CEOs contained in the report, the majority of them complained that the rate at which commercial banks lend to manufacturers discourage productivity in the sector considering the double digit-interest rates across banks.

“Sixty-three percent of the respondents do not agree that the rate at which commercial banks lend to manufacturers encourages productivity in the sector. This can be justified with the double-digit cost of borrowing from the commercial banks, which no doubt, discourages investment,” … Read More...