Cost of Borrowing for Nigerian Manufacturers Jumped 53% in 5 Years

Nigerian manufacturers are paying a lot more to borrow money from banks than they did five years ago, and it’s putting serious pressure on businesses trying to fund production or expand.

According to data from the Manufacturers Association of Nigeria (MAN), manufacturers paid an average interest rate of 32.2% on loans in 2025. Back in 2020, that rate was 21%. That’s an increase of 11.2 percentage points in just five years, an overall jump of 53%.

There was a slight improvement across 2025 itself. Lending rates started the year at 32.5%, dropped to 31.8% in the second half, and the full-year average of 32.2% came in lower than 2024’s 35.6%. But even with that improvement, borrowing is still far more expensive than it was five years ago.

Financial analyst Ike Ibeabuchi explained that when borrowing costs go above 30%, it changes the whole math for businesses. Anyone thinking of expanding a factory, adding a new production line, or upgrading equipment now has to factor in that high cost before deciding if the investment is even worth it.

It’s not just about big investments either. Manufacturers also depend on bank loans for everyday running costs, buying raw materials, stocking up inventory, paying workers and suppliers, and covering the gap between production and actually getting paid for goods sold. So high interest rates hurt daily operations too, not just expansion plans.

There’s more bad news on the funding side. MAN reported that total bank credit given to the manufacturing sector actually shrank, from ₦8.53 trillion in December 2024 to ₦6.61 trillion in December 2025. That’s a drop of ₦1.92 trillion, a 22.5% year-on-year decline.

Manufacturing had one of the steepest credit drops among major sectors, second only to General Services, which fell by 25%.

MAN’s Director-General, Segun Ajayi-Kadir, pointed out that this leaves manufacturing well behind other sectors. Oil & Gas got ₦10.59 trillion in credit, and the Finance sector got ₦9.24 trillion. He said this shows banks are favouring speculative, quick-return activities over sectors that actually produce goods.

“Clearly, the Nigerian manufacturing sector cannot thrive without sustainable and growing financial foundations. The reduction in credit access could further limit capacity utilization, stall technological upgrades and hinder job creation,” he said, adding that the wider economy could suffer too, since weaker manufacturing support could stall diversification and leave Nigeria more exposed to global commodity shocks and inflation.