H1 2026: High interest rates, credit crunch remain disincentives to private-sector investment

•As manufacturing grapples with 35.6% borrowing costs, N1.92trn credit squeeze
•MAN calls for implementation of N1trn Manufacturing Stabilisation Plan
•Convert macroeconomic gains into inclusive growth, CPPE urges FG

High interest rates, access to credit, insecurity and other challenges continued to constrain private-sector investments, as individuals and businesses completed the first half of the year.

For instance, a report released by the Manufacturers Association of Nigeria (MAN) put manufacturers’ costs of borrowing, as of May 2026, at an average of 27.45 percent prime lending rates and 35.6 45 percent maximum lending rates in major commercial banks.

Describing the rates as exploitative, the association, in the report, lamented that such rates have created an environment where borrowing for long-term manufacturing capital expenditure has become financially unviable.

It attributed the development to the elevated Cash Reserves Requirements (CRR) and risk aversion of the commercial banks.

According to MAN, the decision of the Central Bank of Nigeria (CBN) to maintain a stringent CRR of up to 45 percent–50 45 percent for commercial banks has effectively constrained a large portion of loanable banking liquidity.

It also faulted the reliance on commercial banks by government to act as Participating Financial Institutions (PFIs), noting that commercial banks usually impose their risk-averse commercial criteria on those development funds. 

“A critical flaw in the architecture of government interventions is the reliance on commercial banks to act as Participating Financial Institutions (PFIs). The CBN provides the liquidity at lower rates, but PFIs assume the credit risk.

“Consequently, commercial banks impose their standard, risk-averse commercial criteria on these developmental funds. Manufacturers are subsequently asked to provide collateral and meet equity contributions that they cannot afford.

“Therefore, while the funds exist to help struggling manufacturers, they can only be accessed by large companies that are already highly liquid and secure,” the association argued.

READ ALSO: FG, IFC sign cooperation agreement on bankable infrastructure, private investment

While calling on the government to implement the N1 trillion Manufacturing Stabilisation Plan, introduced in 2024, MAN argued that the persistent non-implementation of the fund, despite its prominent inclusion in the Accelerated Stabilisation and Advancement Plan (ASAP) since 2024, remains an issue of promise not kept for the manufacturing sector.

It expressed the optimism that the fund, if implemented, would go a long way in ameliorating the credit crunch in the sector and cushion the impact of the twin shocks of currency devaluation and astronomical energy costs.

The umbrella body for the manufacturers added that delay in implementing the plan has left members of the association with no other option than to navigate over 30 percent interest rate environment without the promised fiscal cushion.

It attributed the scaling down of operations by factories and sometimes some exits from the business space to the gap between policy promises and the actual disbursement, an implementation deficit that continues to stifle Nigeria’s industrial potential.

MAN also linked the steep 22.5 percent contraction in manufacturing credit to the decision of the apex bank to halt its direct development finance interventions.

It argued that by suspending new applications for real-sector support windows, such as the Real Sector Support Fund (RSSF), the monetary authority has abruptly cut off manufacturers from vital single-digit concessionary capital.

“This forces industrialists into a hostile open market where commercial lending rates soar past 35 percent. In an attempt to tame inflation by mopping up excess liquidity, this strategy inadvertently starves the supply side of the economy, leaving the nation structurally incapable of producing its way out of inflationary pressures,” it added.

Meanwhile, the Centre for the Promotion of Private Enterprise (CPPE) has called on the Federal Government to convert improved macroeconomic conditions into inclusive and productivity-enhancing growth.

The Centre, in its H1, 2026 Review, noted that the nation’s economy is entering the second half of 2026 with markedly stronger macroeconomic fundamentals than at the beginning of the year, especially with exchange-rate stability, moderating inflation relative to the exceptionally elevated levels of 2025, stronger external reserves, improved oil production and resilient financial market.

It noted that while this had reduced macroeconomic vulnerabilities, and strengthened investor confidence, such macroeconomic stabilisation had, however, not led to significant, broad-based improvements in productivity, competitiveness, employment and household welfare since businesses still continue to grapple with elevated production costs and structural bottlenecks.

It noted that while H1 2026 was characterised by stronger macroeconomic stability, modest improvements in real-sector performance and household welfare, underscored the need for deeper structural reforms.

On the outlook for the second half of 2026, the Centre expressed cautious optimism, noting that while growth would likely remain below the nation’s long-term potential, the economy appears firmly on a gradual recovery path.