Banks’ credit to manufacturers falls 26.8% to N5.19trn

*… as credit guarantees unlock N47bn *MAN seeks stronger guarantee coverage, N1trn stabilisation fund *Nigeria needs $35bn yearly to industrialise —BoI *Guarantees critical to boosting access to finance — CPPE *FG advocates coordinated financing framework

By Yinka Kolawole

Loans extended by Nigerian banks to the manufacturing sector fell by 26.8 per cent year-on-year to N5.19 trillion in the first half of 2026 (H1’26), from N7.09 trillion in the corresponding period of last year (H1’25).

Read Also: Stock market extend losses, 55 stocks depreciate; 20 record capital gains

This comes as manufacturers grappled with persistent financing constraints and rising operating costs.

The decline also comes amid concerns over the availability of affordable, long-term funding for industrial production, with the Manufacturers Association of Nigeria (MAN) calling for stronger credit guarantees and the full operationalisation of a N1 trillion Manufacturing Stabilisation Fund.

Data from the Central Bank of Nigeria’s (CBN) Q2 2026 Statistical Bulletin also indicated a sustained decline as the outstanding bank credit to manufacturers declined by about 21 per cent between January and June 2026, from N6.57 trillion to N5.19 trillion.

The 2026 monthly figures showed that credit fell from N6.57 trillion in January to N6.37 trillion in February, N5.77 trillion in March and N5.32 trillion in April. It declined further to N5.02 trillion in May before a slight recovery to N5.19 trillion in June.

Despite the slight month-on-month recovery, the June figure remained substantially below the level recorded in the previous year.

The contraction highlights the financing challenges confronting manufacturers amid high production costs, expensive electricity, logistics bottlenecks and exchange-rate pressures.

However, the decline in outstanding credit does not, on its own, establish whether it resulted from reduced new lending, loan repayments or other changes in banks’ credit portfolios.

Credit guarantees unlock N47bn

Meanwhile, the National Credit Guarantee Company (NCGC) said it has unlocked N46.95 billion in loans for 67,512 borrowers across the country, renewing calls for credit guarantees to be expanded to improve access to finance for manufacturers and small businesses.

Managing Director/Chief Executive Officer of NCGC, Dr Bonaventure Okhaimo, said the credit was unlocked using N21.59 billion in guarantees to share lending risks with financial institutions.

Nigeria needs $35bn yearly to industrialise — BoI

The development comes as the Bank of Industry (BoI) estimates that Nigeria requires more than $35 billion annually to finance industrialisation and raise manufacturing’s contribution to Gross Domestic Product (GDP) to 25 per cent.

Highlighting the scale of the funding challenge, Managing Director of the Bank of Industry, BoI, Dr Olasupo Olusi, said no single development finance institution could close the gap.

He stated: “It is a huge gap. BoI cannot do it alone from its balancesheet,\.”

Olusi noted that the funding constraint was reflected in the bank’s 2025 pipeline, where loan applications reached N1.754 trillion against available funding of N645 billion, leaving a shortfall of about 63 per cent.

He said the bank’s mobilisation of more than 2 billion euros through global syndication in 2024, which he described as the largest of such transaction by an African development finance institution, underscored the scale of capital required to support industrial expansion in the country.

Unlocked credit commendable, but insufficient — MAN

Reacting to the NCGC intervention, Director-General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, described the credit guarantee model as an example of the risk-sharing mechanism manufacturers had consistently advocated.

He said the amount was commendable but remained small relative to the estimated $35 billion annual industrial financing requirement.

He stated: “Nigerian manufacturers are not unbankable, they are simply un-de-risked.

“With MPR at 26.5 percent and CRR at 45 percent, banks would rather lend to oil and gas and government securities than to a factory in Kano or Port Harcourt or Lagos that is daily contending with power outage, logistics cost and high cost of forex. So we truly have a credit squeeze, not just high cost.

“Now, this is where credit guarantees matter. A guarantee does not give money, but it gives confidence. Let us look at a situation where NCGC guarantees 60 percent of a facility.

‘’It tells the bank that if this manufacturer struggles because diesel jumps or production is disrupted one way or the other, someone will stand in the gap. That is how N21.59 billion could catalyse N46.95 billion – a multiplier of more than twofold.

‘’For our SMEs who form 70 percent of our membership and lack the 150 percent collateral banks demand, that is the difference between struggling and expansion, between 90-day overdraft and 5-year term loan to buy machinery to retool.

“But let us be clear on scale. Nigeria needs $35 billion yearly to industrialise. That N46.95 billion was unlocked is commendable, within the context of the situation we are in.

‘’However, it is less than $30 million. It is a drop in that $35 billion ocean. So if we are to make any meaningful impact, we need to scale this model massively.”

Ajayi-Kadir said MAN was seeking stronger guarantees and a dedicated financing facility to address the funding gap confronting manufacturers. “That is why MAN is asking for the full operationalisation of the N1 trillion Manufacturing Stabilisation Fund, to be domiciled with BoI, and for NCGC to be capitalised to provide 70 percent coverage for manufacturing at single-digit pricing.

“Without that scale and without forcing transmission of MPR cuts to lending rates, guarantees will remain pilots. With scale, they can restore the N1.92 trillion we lost and finally align monetary policy with industrial reality.”

Guarantees critical to boosting access to finance —CPPE

Also commenting, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, described credit guarantees as critical to improving access to finance for manufacturing, agriculture and small and medium enterprises (SMEs).

He said banks often perceived businesses in these sectors as high-risk borrowers, making guarantees necessary to reduce lending risks and expand credit allocation.

His words: “Credit guarantee is very critical in enabling access to credit in the Nigerian economy. And one of the reasons the Nigerian banking system has been very reluctant in

lending to some sectors is because of the risk of default in some of these sectors, particularly in the real sectors of the economy. And those businesses that are in the SME space.

‘’They are perceived as very risky. So in order to correct this or mitigate this challenge, credit guarantees have become extremely very important.

“They have a very critical role to play in facilitating credits to the manufacturing sector to the agricultural sector and to small and middle enterprises. These sectors are perceived as very risky.

“In order to facilitate credit to those sectors, we need this eh, ready guarantee uh skin. So it needs to be further strengthened. The capitalisation needs to be much more robust than what it is because you are talking of sectors that contribute over fifty percent of our GDP. And if you look at the credit allocation to these sectors, they are very, very low, compared to the potential they have in terms of contribution to economic growth and more particularly contribution to employment generation and contribution to food security and economic inclusion.

“So, from a social and economic perspective, these sectors are very critical. But because of the risk inherent in investing in them, the banks have been, generally, very reluctant. So the credit guarantee scheme has a major role to play in mitigating the risk of lending to this sector. So the government needs to do a lot more to support this agency so that it can give a lot more support to this very critical sector.”

FG seeks coordinated financing framework

Meanwhile, Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has called for a coordinated financing framework involving government, regulators, development finance institutions and commercial capital providers.

Speaking at a Ministerial Roundtable of the Industrial Revolution Work Group (IRWG), Oyedele said Nigeria must move beyond conventional bank lending by mobilising public balance sheets, blended finance, institutional capital, pension and insurance assets, as well as the capital market.

According to him, the proposed National Industrial Finance Compact should ultimately be measured by whether manufacturers can access financing and deploy it to expand installed capacity, create jobs and increase export earnings.

Oyedele also stressed that fiscal, monetary and industrial policies were interconnected, warning that an incentive, guarantee scheme or development fund that manufacturers could not effectively access was the same as having no policy.

On his part, Minister of State for Industry, Senator John Enoh, said Nigeria’s financing architecture remained poorly suited to manufacturing because industrial investments required longer repayment periods than conventional short-term bank lending could provide.

According to him, the challenge was not simply the availability of money but its cost, tenor and structure.

“Our manufacturers do not lack ambition, they don’t lack orders, they don’t lack markets. What they continuously lack is the right kind of money,” Enoh said.

He argued that investments in machinery, factories and production capacity required affordable, long-term financing, noting that businesses pursuing projects with gestation periods of 10 to 15 years could not reasonably be expected to repay loans within three or six months.

“The issue is not that there is no money. It is the price of the money, the term of the money and the capital architecture into the factories,” he said.

Enoh warned that the mismatch between financing structures and industrial investment needs could make trading more attractive than manufacturing, with implications for Nigeria’s industrialisation drive.

He said the ultimate objective was to align capital with production.

“Nigeria has entrepreneurs. Our job is to align capital with production, so we make more at home, employ more at home, and compete,” he said.

Vanguard News

The post Banks’ credit to manufacturers falls 26.8% to N5.19trn appeared first on Vanguard News.