Title: Impact Of High Lending Rates On Manufacturing Sector In Nigeria
Authors: IYADI, Chucks , Prof. OSUJI, Casmir Chinemerem, Andrew E.O. Erhijakpor, PhD, FCA
Volume: 9
Issue: 7
Pages: 183-193
Publication Date: 2025/07/28
Abstract:
This study investigates how high lending rates affect the manufacturing sector in Nigeria, focusing on four key macroeconomic variables: lending rates, monetary policy rates, inflation, and exchange rate volatility. A quantitative approach is used, relying on numerical data and statistical analysis to examine the relationship between these independent variables and manufacturing performance. The research adopts a causal-comparative design and utilizes secondary data sourced from the Central Bank of Nigeria (CBN). The study population includes all manufacturing firms in Nigeria, with data covering the period from 1992 to 2023 to capture long-term trends. EViews software is employed for the analysis.Findings reveal that lending rates and exchange rate volatility are the most influential factors shaping manufacturing growth. High lending rates hinder expansion by raising the cost of borrowing, while exchange rate depreciation tends to boost growth by making Nigerian products more competitive abroad. Inflation has a marginally positive effect, while monetary policy rate shows limited direct impact on manufacturing output.The study recommends targeted interventions to reduce borrowing costs, such as interest subsidies or credit guarantees, to ease financial pressure on manufacturers. It also suggests that policymakers maintain a stable but competitive exchange rate framework that supports export-oriented industrial activity. Lastly, the Central Bank of Nigeria should align monetary policies with the goal of industrial growth, ensuring access to affordable credit for the manufacturing sector. These actions, taken together, can create a more supportive environment for long-term industrial development in Nigeria.