High Lending Rate Impeding Manufacturing Sector’s Productivity-MAN

The Manufacturers Association of Nigeria has condemned the rate being used by commercial banks’ in giving out credit, stating that the development is currently hampering the sector’s productivity.

MAN said this in a report seen by THE WHISTLER on Friday in Abuja.

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It said the cost of borrowing in Nigeria which has remained at double-digit is discouraging manufacturers from being productive.

The Association noted that over 60 per cent of respondent from its polls disagreed that the size of commercial bank loan to manufacturing sector had encouraged manufacturing productivity.

It stated, “Special single digit loans offered by development banks are still hard to leverage as conditionalities to assess the loans through commercial banks are often overwhelming and laden with additional charges that will eventually make the interest rate double digit.

“Seven per cent of respondents were, however, of the opinion that the rate at which commercial banks lend to manufacturers encourages productivity in the sector while the remaining 22 per cent were not sure of the impact of the rate of lending on productivity in the manufacturing sector.”

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According to the report, the presence of the government in the money market, through Treasury Bills, crowds out the private sector from the market.

It further noted that 27 per cent of respondents were not sure if the size bank loans to the sector encouraged increased productivity, while the remaining nine per cent of Chief Executive Officers of manufacturing companies agreed that the volume of commercial banks’ loan to the sector encouraged productivity.

It stated, “This finding clearly highlights the need to continuously monitor and ensure effective implementation of the Loan to Deposit Ratio policy of the Central Bank to ensure actualisation of the objectives behind its formulation.

“This will further promote economic recovery and ensure quick return to the path of growth from the trap of recession that is currently holding the economy down.”

Further details of the report shows that 52 per cent of respondents disagreed that government capital expenditure implementation encouraged productivity in the sector.

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