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The central bank’s move to hike interest rates is having an adverse effect on Nigeria’s largest companies, according to recent data showing an increase in the cost of servicing bank loans. 

Their borrowing costs—interest and other costs—rose by 44.92 percent to N128.36 billion as of September 2022 from N88.57 billion during the same period in the previous year, according to a recent estimate.

Fidson Healthcare, May & Baker Nigeria, Okomu Oil, Presco, Transcorp, UAC of Nigeria, BUA Foods, Nestle Nigeria, Dangote Sugar Refinery, Nascon Allied Industries, Cadbury Nigeria, Nigerian Breweries, International Breweries, Guinness Nigeria, Dangote Cement, BUA Cement, and Lafarge Africa are some of the companies mentioned.

Additional research revealed that the enterprises’ total borrowings—both short- and long-term—increased by 35.96 percent in Q3 2022 to N1.65 trillion from N1.21 trillion in the previous quarter of 2021. 

Companies in the largest economy in Africa are turning to borrowing at a time when interest rates are rising at the quickest rate in decades due to rising raw material and energy prices. 

The benchmark interest rate set by the Central Bank of Nigeria jumped by 400 basis points this year, from 11.6 percent in May to 15.5 percent in September. 

The recent increase in interest rates will have a significant impact on costs and profitability for businesses who have variable-rate loans or need to refinance.

Interest rates on long-term loans increased by 964 percent and 993 percent, respectively, as of September 2022, according to producers of palm oil Okomu Oil Palm and Presco Plc. 

In the nine months that ended in September 2022 (9M 2022), Okomu’s interest on long-term loans increased to N479.7 million from N45.08 million in the corresponding period the previous year, and Presco Plc’s finance costs increased to N5.97 billion in September 2022 from N546 million in September 2021.

“Particularly for Presco Plc, the main driver was increased borrowings and the rate hike. Over the last four quarters, the company’s debt-to-equity ratio increased from 59.4 percent to 152.5 percent as total debt went from N25 billion to N65.9 billion,” Kayode Eseyin, a research analyst with CardinalStone Partners, said.

“The impact was felt in the first half of 2022 financials which revealed an 8x jump in the net finance costs and the same trend was witnessed in 9M 2022.”

Eseyin doesn’t anticipate the borrowing binge to continue because their balance sheet’s debt is anticipated to result in ongoing pressure on financing costs. 

He did point out that the fact that they would have to pay interest on these debts meant that the greater borrowing might result in decreased profits.

Cement Producers 

The three biggest cement producers in Nigeria, Dangote Cement (DangCem), BUA Cement, and Lafarge Africa, reported an increase in interest costs of 36.81 percent. 

From N39.48 billion in the same period last year to N53.39 billion in 9M 2022, DangCem’s interest expense increased by 35.23%. In addition, its total borrowings increased by 28.66%, from N531.35 billion to N686.64 billion, with bank loans making up 72% of the total loans reported over the period. 

As of September 2022, DangCem reported N398.5 billion in bank loans. Letters of credit obtained to finance inventories, real estate, buildings, and machinery are included in bank loans, according to the company.

The increase in interest expenses at BUA Cement was attributed to the “discontinuance of capitalization of bond and loan interest on Sokoto line 4”, which was stated to have increased by 418.49 percent.

From N1.19 billion a year earlier to N6.17 billion in 9M 2022, it spent more money on interest. A 10.42 percent increase from N88.26 billion during the same time last year brought its total bank loans for the period to N97.46 billion. 

However, from N3.5 billion in 9M 2021 to N881 million in 9M 2022, Lafarge Africa’s interest on borrowings decreased by 74.90 percent. 

Bank loans contributed N28.9 billion to the N32.51 billion total increase in borrowings, or 44.81 percent.

FMCG Firms

Finance costs for BUA Foods were N6.39 billion in the third quarter of 2022, down 1.84 percent from N6.51 billion in the same period last year. According to the company, this was caused by commercial transactions and an effective funding mix. 

Nestle Nigeria reported interest costs on financial obligations totaling N7.38 billion in the third quarter of 2022, a 42.75 percent increase from N5.17 billion the previous year. The number includes interest expense on intercompany loans, which increased from N3.8 million to around N6.7 million this year.

The interest on bank loans at Dangote Sugar Refinery decreased from N105 million in 9M 2021 to N95 million in 9M 2022, a 9.52 percent decrease. The company recorded a 37 percent increase in financial expenditures associated with letters of credit, from N3.25 billion in the same time last year to N4.47 billion this year. 

Nascon Allied Industries reported that interest on bank loans and overdrafts increased by 76.67% to N106 million in the third quarter of 2022 from N60.39 million in the previous quarter.

At N342.5 million in the third quarter of 2022, interest on borrowings reported by Cadbury Nigeria increased by 129.53 percent from N149 million in the previous quarter. 

Beer Manufacturers

Nigerian Breweries increased their interest expense by 61.85% to N27.19 billion in the third quarter of 2022 from N16.8 billion the previous year. 

International Breweries said that interest costs rose from N1.33 billion to N4.92 billion, a 269.9 percent rise. 

Guinness Nigeria reported an increase in interest expense on loans and borrowings of 485.8% to N703 million in the first quarter (Q1) 2023 ended in September 2022 from N120 million in the corresponding period of 2021.


The interest expense on loans for Conglomerates Transnational Corporation decreased from N11.4 billion in the prior year’s 9M to N9.6 billion in the current period. 

According to UAC of Nigeria, interest on bank loans increased by 123.6 percent, from N999 million to N2.26 billion. 


Healthcare Fidson Healthcare had a 42.86 percent increase in interest on bank loans from N896 million to N1.3 billion in the third quarter of 2022. 

According to May & Baker Nigeria, interest on bank loans and overdrafts increased by 21.07 percent, from N299 million to N361.7 billion.



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