Nigerian Factories Still Borrow Above 30% Despite Modest Rate Decline
High borrowing costs weigh on Nigerian factories
Nigeria’s manufacturing sector continued to face high borrowing costs in 2025, with the average interest rate on industrial loans standing at 32.1% despite a modest decline from the previous year.
According to data from the Manufacturers Association of Nigeria (MAN), the average lending rate for manufacturers fell from 35.6% in 2024 to 32.1% in 2025. However, borrowing costs remained above 30% across all major manufacturing segments surveyed, highlighting the continued difficulty businesses face in accessing affordable finance.
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Manufacturing Lending Costs Remain Elevated
MAN data showed that manufacturers paid an average lending rate of 32.5% during the first half of 2025 before the rate eased slightly to 31.8% in the second half.
While the reduction represents some improvement, the cost of borrowing remains considerably high for businesses that require substantial financing to expand production, purchase machinery or develop new facilities.
The persistent level of interest rates also means that companies may have to dedicate a larger share of their operating income to servicing loans, potentially limiting the amount available for expansion and capital investment.
High Credit Costs Could Slow Industrial Expansion
Manufacturing companies typically require significant upfront investment in equipment, production facilities, warehouses, utilities and logistics infrastructure.
When borrowing costs remain above 30%, financing such projects becomes more expensive and can affect decisions around expansion, capacity upgrades and new investments.
For businesses already dealing with high energy, transportation, raw-material and labour costs, expensive credit adds another layer of financial pressure.
The situation could also make smaller manufacturers particularly vulnerable because they often have fewer financing options and may depend more heavily on bank loans to fund working capital and expansion.
Implications for Industrial Property
The high cost of industrial finance also has implications for Nigeria's property market.
Factory construction, warehouses, logistics parks and other industrial real estate require substantial capital. If manufacturers delay expansion because of expensive credit, demand for new industrial facilities could also remain constrained.
Conversely, lower borrowing costs could encourage manufacturers to expand production capacity, creating additional demand for factories, warehouses and other supporting infrastructure.
This makes the cost and availability of credit an important factor not only for manufacturing output but also for industrial property development.
Rate Decline Has Yet to Translate Into Cheap Credit
The modest reduction in manufacturing lending rates comes against a broader backdrop of changing monetary conditions.
Recent financial-market developments have shown some easing in Nigerian interest rates. However, reductions in market yields do not automatically translate into equivalent reductions in commercial lending rates.
Banks also consider funding costs, credit risk, operating expenses and the financial position of borrowers when pricing loans.
As a result, manufacturers may continue to face relatively expensive credit even as benchmark and market rates gradually decline.
Financing Remains Critical to Nigeria’s Industrial Growth
The persistence of borrowing costs above 30% highlights the challenge of financing productive investment in Nigeria.
For the manufacturing sector to expand its capacity, businesses require access to longer-term financing at rates that allow investments in factories, machinery and infrastructure to generate sustainable returns.
A sustained reduction in financing costs could therefore support industrial investment and, indirectly, demand across construction, logistics and commercial property markets.
For now, however, the MAN figures show that the improvement in lending rates remains modest, with Nigerian manufacturers still operating in an environment where the cost of credit remains a significant constraint.
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