The Central Bank of Nigeria has reported 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.
According to the CBN’s Sectoral Analysis of Deposit Money Banks’ Credit report, manufacturers additionally borrowed a substantial N1.42 trillion between January and June 2023.
Banks’ credit to the sector within one year, increased from N4.53 trillion in June 2022 to N6.98 trillion in June of the current year.
A month-by-month analysis of lending reveals the following figures: N5.56 trillion 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.
It is worth noting that the Monetary Policy Committee of the central bank raised the benchmark interest rate from 11.5% earlier in the year to 18.75% in June.
This was part of a series of eight consecutive rate hikes aimed at curbing inflation and reducing liquidity in the economy.
With the mounting debt, stakeholders in the manufacturing sector have consistently argued that the current double-digit lending rate is unfavorable, as it directly impacts the cost of production and the competitiveness of the sector.
The report stated, “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,”
On the other hand, borrowing by farmers to grow agricultural produce declined to N1.83 trillion in June from N1.85 trillion recorded in January, suggesting a reduction in loan appetite.