Manufacturing sector’s debt to banks hits N6.98trn, as credit to operators jumps to 52.08%

Amid inclement environment forcing closure of businesses by operators in the manufacturing sector of the economy, the Central Bank of Nigeria (CBN) has confirmed that debt owed to commercial banks in the country by manufacturers has risen to N6.98 trillion in June, 2023.

According to the CBN in its Sectoral Analysis of Deposit Money Banks’ Credit report, the debt rose to N6.98 trillion from the previous N5.56 trillion recorded in January 2023.

The report further showed that manufacturers borrowed the sum of N1.42 trillion between January 2023 and June 2023.

Monthly analysis of lending showed that N5.56 trillion was borrowed in January, N5.57 trillion in February, N5.65 trillion in March, N5.81 trillion in April, N5.70 trillion in May and N6.98 trillion in June 2023.

The report also indicates that banks’ credit to the sector increased by 52.08 percent in one year from N4.53tn as of June 2022 to N6.98tn as of June this year as the sector received the largest share of the credit from banks during the review period.

The CBN’s Monetary Policy Committee (MPC) recently increased the benchmark interest rate from 11.5 percent earlier last year, to 18.75 percent in June this year, across eight consecutive rate hikes as part of strategies to reduce inflation and mop up liquidity from circulation.

CBN Governor, Olayemi Michael Cardoso

With the increase in debt, stakeholders in the manufacturing sector have maintained that the current double-digit lending rate is unfavourable as it has a direct impact on the cost of production and the competitiveness of the sector.

“The projection for the Net Domestic Credit, though on the upward trajectory, reflects the expected credit dynamics in the economy. Credit to the Government is expected to decrease over the period due to the expected significant reduction in fiscal deficits arising from the removal of fuel subsidy. On the other hand, credit to the private sector is expected to increase owing to the government’s plan to achieve a higher level of growth driven by the private sector,” the report read partly.

Meanwhile, borrowing by farmers to cultivate agricultural produce declined to N1.83 trillion in June from N1.85 trillion recorded in January, suggesting a reduction in loan appetite.