4 hours Ago By Temitope Aina
Nine listed Nigerian companies on the Nigeria Exchange recorded a surge in finance costs, rising by 69 per cent from N757.65bn in 2023 to N1.28tn in 2024, as high interest rates and mounting debts strain corporate finances, The PUNCH reports.
An analysis of financial statements from Nigerian Breweries, MTN Nigeria, Lafarge Africa, Nestlé Nigeria, Champion Breweries, Nascon Allied Industries, Seplat Energy, Transnational Corporation, and Africa Prudential showed a significant increase in borrowing costs over the past year. Financing cost is the cost, interest, and other charges involved in the borrowing of money to build or purchase assets. MTN Nigeria had the highest finance cost, which rose by 82 per cent from N236.
93bn in 2023 to N431.65bn in 2024. Nestlé Nigeria followed, with a 68 per cent jump from N233.
50bn to N392.83bn within the period. Nigerian Breweries’ interest expenses also climbed by 34 per cent from N189.
19bn to N252.81bn. Seplat Energy recorded a staggering 200 per cent rise in finance costs, moving from N45.
44bn in 2023 to N136.51bn in 2024. Lafarge Africa also saw an increase of 64 per cent, as its borrowing costs jumped from N25.
98bn to N42.55bn. Similarly, Transnational Corporation’s finance costs stood at N18.
53bn in 2024, compared to N25bn in the previous year, marking a 26 per cent decline. Nascon Allied Industries also recorded a drop of 18 per cent, from N1.44bn in 2023 to N1.
18bn in 2024. Champion Breweries reported one of the sharpest increases, with finance costs soaring by 529 per cent from N169.91m to N1.
07bn, while Africa Prudential recorded no finance costs in 2024, compared to N861m in 2023. Analysts attribute the rising debt costs to elevated interest rates and a tougher economic environment. Many companies have been forced to borrow at higher costs to sustain operations amid inflationary pressures and currency depreciation.
With the continued rise in finance costs, analysts raise concerns over the growing sustainability of corporate debt levels, especially as profitability is being eroded by increasing borrowing expenses. Commenting on the issue, an economist and investment specialist, Vincent Nwani, stated that over the last eighteen months, government interest rates have surged, and interest rates, whether it is the monetary policy rate or commercial bank borrowing rates, have also risen. “Some of these companies are also exposed to foreign loans.
If you add currency depreciation and rising interest rates, you get a much higher loan repayment burden,” Nwani said. He noted that the telecommunications and manufacturing sectors have been particularly affected, with several companies incurring financial losses due to increased borrowing costs and the impact of exchange rate fluctuations. “Some companies that can no longer cope with these challenges have had to scale down their operations,” he added.
According to Nwani, foreign investors who previously committed significant funds to Nigeria are now moving their investments abroad. “We have a situation where people have invested so much, but they are not getting any returns. It’s not a good sign,” he said.
He further explained that the downturn is also affecting government revenue. “A lot of companies that declared losses can no longer pay their taxes, and the Federal Government is losing money,” he stated. Despite these economic pressures, Nwani acknowledged that inflation had been slightly curbed through recent economic adjustments.
“At least inflation has been dragged down through rebasing,” he concluded. The PUNCH reported that a total of 15 listed companies on the Nigerian Exchange recorded a combined debt of N3.62tn under non-current liabilities as of September 2024, reflecting a rise compared to N2.
74tn in 2023..
