Bank Lending to Manufacturers Drops to ₦2.1trn Amid Sector Challenges

Amid mounting challenges facing Nigeria’s manufacturing sector, banks cut lending to manufacturers and traders by ₦2.1 trillion in the first half of 2025, bringing total credit to ₦10.946 trillion at the end of June. This represents a 16.2 per cent decline from ₦13.065 trillion recorded at the end of 2024.

An analysis of Central Bank of Nigeria (CBN) data also showed reductions in bank loans to the real estate and education sectors during the same period.

According to the CBN, credit to the manufacturing sector fell by 16.8 per cent, or ₦1.437 trillion, to ₦7.091 trillion at the end of June 2025, down from ₦8.528 trillion in December 2024.

Similarly, loans to the trade and general commerce sector declined by 15 per cent, or ₦682 billion, to ₦3.855 trillion in June 2025, compared with ₦4.536 trillion at the end of 2024.

The education sector also saw an 11 per cent drop in credit, with loans falling by ₦9.8 billion to ₦79.43 billion at the end of June 2025 from ₦89.25 billion in December 2024.

In the real estate sector, bank lending decreased by 5.5 per cent, or ₦53 billion, to ₦904.15 billion in June 2025, down from ₦957.38 billion at the end of 2024.

Banks further reduced loans to sundry activities classified as “General” by 22 per cent, or ₦1.29 trillion, to ₦4.03 trillion at the end of June 2025 from ₦5.80 trillion in December 2024.

Overall, lending to the manufacturing, trade, education, real estate and general sectors fell by 17.5 per cent, or ₦3.48 trillion, to ₦16.432 trillion at the end of June 2025, compared with ₦19.909 trillion six months earlier.

As a result of the decline across these sectors, total bank credit to the private sector dropped by 17.8 per cent, or ₦1.057 trillion, to ₦58.159 trillion at the end of June 2025, from ₦59.216 trillion at the end of December 2024.

Further analysis showed that the combined share of the five sectors in total private sector credit declined to 28.3 per cent in June 2025 from 33.6 per cent at the end of 2024.

Analysts at FBNQuest Merchant Bank identified limited access to affordable bank financing as one of the key factors behind the weak performance of the manufacturing sector, which averaged a growth rate of 1.29 per cent over five quarters up to the first quarter of 2025.

In a report titled “The State of the Manufacturing Sector,” FBNQuest analysts said:

“Nigeria’s manufacturing sector has consistently underperformed despite the potential of the sector to drive economic diversification, create employment, and stimulate industrial development.

“This disappointing outturn can be attributed to persistent structural challenges, including unreliable power supply, inadequate infrastructure, limited access to affordable finance, and regulatory bottlenecks.

“Compounding these longstanding issues are elevated market interest rates, which have intensified cost pressures and heightened operational uncertainties for manufacturers, further constraining the sector’s growth.

“In addition, the significant reduction of consumer purchasing power—driven by rising inflationary pressures—has weakened domestic demand for locally produced goods, further exacerbating the overall challenges confronting the manufacturing sector.”

The analysts noted that manufacturing GDP grew by just 1.69 per cent year-on-year in the first quarter of 2025, while the sector averaged 1.29 per cent growth over the past five quarters.

Although manufacturing remained one of the major contributors to VAT revenue in the fourth quarter of 2024, foreign direct investment into the sector has dropped sharply. In the first quarter of 2025, FDI inflows fell to $129.2 million from $421 million in the preceding quarter, marking the lowest quarterly inflow since Q2 2022, when $98.2 million was recorded.

According to FBNQuest, the sharp fall in investment reflects rising investor concerns over structural challenges, macroeconomic instability and policy uncertainty, further weighing on the sector’s performance.

The analysts concluded that while the manufacturing sector has strong potential to drive Nigeria’s industrialisation, unlocking this potential will require sustained efforts to address deep-rooted structural weaknesses and prevailing macroeconomic pressures.

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