ABSTRACT
The manufacturing sector of the economy is the most important sector and for obvious reasons it
is affected by the unprecedented increase of banks high lending rate to borrowers. To appraise
the effect of this situation prompted this study so as to provide theoretical and empirical
evidence on the effect of high bank lending rate on the manufacturing sector of the Nigerian
economy. Also, to determine the manufacturing sectors capacity, product pricing and sectors
profitability. Questionnaires were designed and distributed to elicit information from the sample
population; also, data were gotten through primary and secondary sources. These data collected
were presented and analyzed by means of tables and percentages. The hypothesis adduced was
tested using such tools as chi-square. Results have shown that the manufacturing sector has been
constrained due to the inadequate funding culture of Nigerian banks and banks no longer want
to lend on a long term basis, even when they lend, it is at cut-throat and high interest rates.
Therefore, banks who are the ultimate source of bank loan should realize that, manufacturers
are quality customers and bank rate should be a dialogue between the two sectors so that the
manufacturing sector could survive and interest rates need periodical adjustments so that there
would be increase in the level of investment.

CHAPTER ONE
1.0. INTRODUCTION
1.1. BACKGROUND OF THE STUDY
Granting that no country of the world can ever attain an expected level of economic development
without a virile and highly productive manufacturing sector makes it imperative that Nigeria as a
country must pursue policies aimed at stimulating a rapid growth capable of increasing the
productivity of the manufacturing sector and thus, improve national economy. This very
important sector transforms our numerous raw materials into marketable finished products that
are required in our daily existence as a people and as a nation.
The sector generates foreign exchange through the exportation of its finished products. Realizing
the importance of this sector, Nigerian government had before now, made concerted efforts to
give reasonable support and assistance to the realization of the growth of the manufacturing
sector in Nigerian economy.
It is greatly accepted that the oil boom of the 70’s greatly improved Nigeria’s economy and
earned her industries need foreign exchange to import raw materials.
Regrettably, thus boom changed drastically in the 80’s with the dwindling oil revenue. The effect
however saw the folding up of some industries, thus, negatively affecting the manufacturing
sector of the economy. The harsh economic situation of the time wholly informed that sectors
should be opened so as to supplement the poor oil revenue. This unpleasant economic condition
got worse with military leadership which was considered unstable.
Yet, the manufacturing sector remains the most wanted sector to supplement the foreign
exchange earnings of the oil sector through exportation of their finished products.
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Nevertheless, military regimes are known not to offer enabling environment for effective
industrial growth but with the emergence of a democratically elected government in May 1999,
the Nigerian nation started the creation of enabling opportunities and environment to promote the
gradual development of the manufacturing sector. However we must realize that the
manufacturing sector of the economy has been the most unfortunate and hardest hit by the high
interest rates.
Odimaya (2000:17) noted that “banks no longer want to lend on long-term it is usually at cutthroat
interest rates”.
This situation has continued to affect the manufacturing sector, even in this democratic
dispensation with the federal government economic policy of deregulation of the banking sector.
This condition according to kazeem (2004:23) has greatly affected the manufacturing sector.
This opinion of kazeem is made stronger when he wrote that the banks high interest lending rates
continue to threaten the agreement reached by the Nigerian government, the central bank of
Nigeria (CBN) and the banks that lending rates should not be more than the minimum rediscount
rate.
The above agreement was to encourage bank lending to industrialists and so, stimulate the
manufacturing sector development and improvement of the national economy which would
guarantee rapid industrialization in line with development objectives.
Manufacturing which cannot afford the high bank lending rates hardly survive and they are
mostly neglected by government policies and its these small scale industries that respond to the
lives and needs of the ordinary citizen.
Libanio (2006:22) argues that the manufacturing sector has an important role in the growth and
performance of the economy but the manufacturing output was not enough to generate sizeable
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growth in the economy. Regrettably, the performance of the manufacturing sector in Nigeria has
been constrained due to inadequate funding culture of the Nigerian banks and even when banks
lend, they lend on a high rate of interest on the loan and banks are the primary source of capital
for manufacturers or industrialists.
Goldman Sachs (2008:24) talks about the objective of the approved vision 20-2020 study
projections that Nigeria will be 20th and 12th largest economy of the world and Africa
respectively.
This vision is to be realize through the growth of the private sector therefore, overconcentration
and overdependence should be reduced on the oil sector because there have been a growing
concern on the decline of the output of the manufacturing sector in Nigeria which is faced with
the problem of accessibility of funds and high interest rates of banks.
1.2. STATEMENT OF THE PROBLEMS
The first problem of the study is the poor capacity utilization of the manufacturing sector.
The second problem of the study is the high cost of product pricing of the manufacturing sector.
The third problem of the study is lack of profitability of the manufacturing sector.
1.3. OBJECTIVES OF THE STUDY
1. The first basic objective of the study is to examine the effects of high interest rates on
manufacturing sectors capacity utilization.
2. To examine the effects of high interest rates on the product pricing of the manufacturing
sector.
3. To examine the effects of high interest rates on the profitability of the manufacturing sector.