Nigeria’s leading listed companies are facing a financial bind, with sharply rising interest expenses despite efforts to reduce debt, driven by the Central Bank of Nigeria’s (CBN) stringent monetary policies. With the Monetary Policy Rate (MPR) at 27.5% as of July 2025, borrowing costs have soared to multi-decade highs, exacerbating the impact of persistent inflation (22.22% in June) and tight liquidity conditions, according to an analysis by Nairametrics.
A study of ten major firms in cement, oil and gas, and consumer goods sectors revealed a 31% year-on-year surge in aggregate interest expenses, climbing from N411 billion to N538.5 billion in H1 2025, even as total borrowings dropped nearly 10% to N6.49 trillion. BUA Cement saw a 250% spike in interest costs despite slightly lower debt, while Seplat Energy’s finance charges rose 141% after a 20% debt reduction. Dangote Cement, carrying N2.4 trillion in debt, faced a 65% increase in interest expenses, and Lafarge’s costs tripled. Aradel Holdings reported a 49% rise tied to upstream oil investments.
However, some firms defied the trend. BUA Foods cut finance costs by nearly 50% after slashing borrowings by 20%, while Nigerian Breweries and Nestlé saw double-digit declines through strategic repayments and robust cash flows. The interest coverage ratio, a key measure of debt affordability, fell from 24x to 17x across the sample, with Nigerian Breweries dropping to 2.39x and Dangote Sugar struggling at 0.59x, signaling earnings barely cover interest costs. Conversely, Cadbury improved from 1.77x to 7.63x, and Nestlé rose to 2.82x.
Despite financing pressures, strong cash flows cushioned some firms. MTN Nigeria turned a N518 billion loss in H1 2024 into a N415 billion profit, with operating cash flow nearly doubling to N956 billion. Dangote Cement’s profit soared to N520 billion, with cash flow at N874 billion, while Seplat’s cash generation jumped to N755 billion. Nestlé flipped a N177 billion loss to a N51 billion profit, and BUA Cement’s profits quintupled to N181 billion.
The CBN’s tight policy stance, aimed at curbing inflation, shows no signs of easing, with the naira stabilizing at N1,565/$1 in the parallel market due to $4.1 billion in H1 2025 forex interventions. While reduced FX losses offer relief, high naira debt costs remain a challenge. With Nigeria’s capital importation rising 67.12% to $5.64 billion in Q1 2025, corporates must prioritize debt efficiency and cash generation to navigate this high-rate environment.
