IMPACT OF LENDING RATE ON MANUFACTURING INDUSTRY OUTPUT IN NIGERIA

• Christopher Ifeanyi Moemenam

  Department of Banking and Finance, B.U. Nzeribe State Polytechnic, Awomamma, Oru East, Nigeria

• Okere Peter A

  Department of Banking and Finance, B.U. Nzeribe State Polytechnic, Awomamma, Oru East, Nigeria

Bank lending rate is one of the determinants of manufacturing industry output in Nigeria. Therefore, this research work investigates the Impact of Lending Rate on Manufacturing Industry Output in Nigeria. It was motivated by high lending rate of between 25-30% charged by banks to manufacturers despite CBN interventions. The method of data collection was questionnaire in a fixed response type with a Likert Type Response Format. The bench mark was 2.5. Mean and frequency counts were used in analyzing data. A major finding of this work reveals that there is a strong agreement among respondents that high lending rate reduces manufacturing industry output. Other findings of this research work shows that lending rate have no impact on Manufacturing Industry Output. Hence, urgent measures need to be in place. Further findings reveals that high inflation, restrictive CBN AMR, elevated credit risks, massive public sector deficit financing, foreign exchange instability, high default rate and credit risks, high cash reserve ratio, onerous operational cost, decrowding out effects and lack of robust credit scoring infrastructure are some of the constraint factors militating against bank lending rate in Nigeria. Among the policy recommendations of this research work are that government through its CBN should create two-tier MPR; (1) MPR for commercial entities with double digits and (2) MPR for manufacturing entities with single digits as observed in China and South Africa.

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