Manufacturers Threaten to Sacks if Banks Continue 37 Percent Interest on Loans

Otunba Francis Meshioye, president, Manufacturers Association of Nigeria  (MAN), has warned that high interest rates charged by banks will lead to jobs’ losses and exorbitant prices of goods.

Meshioye also said that businesses may apply different tactics to reduce their losses.

He said the ripple effect of higher interest rates is that manufacturers may lay off workers when sales become worse due to high prices.

The MAN president said this in an interview on Arise TV while discussing issues frustrating Nigerian manufacturers.

The Manufacturing Association of Nigeria in its second quarter Q2 “24 MAN CEO’s Confidence Index (MCCI)” entitled “MAN Position on the Incessant Increase in Interest Rate” said the lending rate grew by 6.4 percent in the second quarter of 2024 up from a 28.6 percent interest rate to 35 per cent in the first three months of the year.

He said, “The NPR has got a rising 26.25 currently. And definitely, this has one immediate effect at the bank. What happens now is before that time, we are actually having about 30-32 percent interest that are paying on our loan. Currently, it is really between 32-37 per cent. You will find very few banks who will give it to you at 32-33 per cent, but oftentimes it is 35-37 per cent.

“You will agree with me that this means that the cost of funding has again jumped up to all businesses, and the impact of the manufacturing sector is very enormous. What you can do immediately as a true business person is to first look at your process and find ways to reduce costs.

“If you are hitherto running an efficient process, there is little you can do in a very short time. So you are likely to go on to see how to pass these costs to an extent on the consumer. You may want to reduce your profit margin, but definitely it will impact the consumer. Now, the impact of consumer tests use certain things. Looking at the inflationary rate generally, there is no sufficient money for patronage at this point.”

The MAN boss said Nigerian consumers do not have the purchasing power to buy goods at an unbearable price.

According to him, consumers will cut their expenditure on most of the manufactured goods leading to lower demand.

Meshioye said, “What will happen is that they will lower demand for the goods. What will happen in this case is that since demand has diminished, then we will have a lot of stocks.

“Which means that we will be having a pile of unsold stocks, mounting up on our way home. The effect of this is not palatable because we need to understand in the first instance that these stocks were funded with loans taken from banks, and the interest is going up, and the stocks are unsold.

“Eventually, we are going to visit the manpower, there will be a reduction in our employment, people who lay-off staff, already saturated markets, where the unemployment is very high will continue to increase.”