• Thursday, May 30, 2024
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Manufacturers’ borrowing costs almost triple in one year

Manufacturers’ borrowing costs almost triple in one year

The combined borrowing costs of nine manufacturers in Nigeria rose by 193.3 percent within a year as a result of the interest rate hikes by the Central Bank of Nigeria.

The firms are Dangote Cement Plc, Nestle Nigeria Plc, Nigerian Breweries Plc, International Breweries Plc, BUA Foods Plc, BUA Cement Plc, Cadbury Nigeria Plc, Unilever Nigeria Plc and NASCON Allied Industries Plc.

BusinessDay analysis of the consumer goods firms’ latest financial statements show that their total interest expense increased to N127.9 billion in the first three months of this year from N43.6 billion in the same period of 2023.

“The tightening of monetary policy has been consistent which is a chance that interest expense will be very high. The CBN’s way to tame inflation is to increase interest rate which is what is reflecting in the manufacturers’ interest expense,” Muda Yusuf, chief executive officer of the Centre for Promotion of Private Enterprise, said.

The apex bank has increased the monetary policy rate (MPR), known as its benchmark interest rate, by 600 basis points so far this year to 24.75 percent.

The MPR is the baseline interest rate in an economy, and every other interest rate used within the economy is built on it.

The main interest rate has been raised twice since Olayemi Cardoso, the CBN governor, assumed office on September 26, 2023.

Cardoso said the committee raised the MPR by 200 basis points in March to 24.75 percent, and retained the asymmetric corridor at +100 basis points and -300 basis points around the MPR.

While speaking about the reason for the hike, he said the major objective of the CBN is to manage inflation, adding that the bank is not unmindful of the impact that the interest rate increases are having.

He said with the interest rate increases, the foreign exchange market “becomes a lot more lively” — a situation the CBN governor said is reducing the exchange rate and cost.

“So, it’s not a one-sided affair that the increase in interest rates is strangulating the economy. While it may have those tendencies of one side, with the foreign exchange rate coming down, that also helps to moderate the overall,” he added.

Uchenna Uzo, professor of marketing at Lagos Business School, said manufacturers in the consumer goods space have been the most hit by foreign exchange volatility because they are highly import-dependent; hence they have incurred very high operating expenses and have had to rely on borrowings to run their day to day operations.

He said a lot of them in the short term have to take loans from the bank or delay payment to their suppliers.

“If a firm has a very high-interest expense, it implies that the profitability is at stake and such a firm is likely to declare high losses,” Uzo added.

A breakdown of the total data revealed that Cadbury, Nestle, Nigerian Breweries, BUA Foods, and Dangote Cement were the firms that recorded the highest growth in interest expense.

Cadbury Nigeria had a 731.6 percent growth, followed by Nestle Nigeria with 359.9 percent, Nigerian Breweries (284.3 percent), BUA Foods (278.2 percent), and Dangote Cement (162.7 percent).

“The manufacturers recorded increase in interest expense because of FX and higher interest rates for those with local bank loans and credit facilities,” Oluebube Nwosu, consumer goods analyst at Vetiva Capital, said.

Other manufacturers like Lafarge Africa Plc and Dangote Sugar Refinery Plc saw a cumulative decline in their interest expense to N0.27 billion from N0.79 billion respectively.

Analysis of individual firms


Cadbury Nigeria’s interest expense increased to N1.58 billion in Q1 2024 from N0.19 billion in the same period of last year.

The firm is a food, sweets, and drink company headquartered in Lagos, Nigeria, and traded on the Nigerian Stock Exchange. It is a subsidiary of Mondelez International, one of the largest snacking companies in the world.


Nestle’s interest expense rose to N27.09 billion in Q1 2024 from N5.89 billion in the same period of 2023.

The firm is a publicly listed food and beverage specialty company headquartered in Lagos. It’s mostly owned by a holding company based in Switzerland and have ties to the company Tolaram Group. The company was founded in 1961 and conducted trading under the name of Nestle Products Nigeria Limited.

Nigerian Breweries

Nigerian Breweries’ interest expense grew to N18.1 billion in Q1 2024 from N4.72 billion in the same period of 2023.

The firm engages in the brewing, marketing, and selling of lager, stout, non-alcoholic malt drinks, and soft drinks in Nigeria. It offers its products under the Star, Heineken, Gulder, Star Radler, More, Desperados, 33 Export, Star Lite, Goldberg, Life, Tiger, Turbo King, Legend, Williams, Legend and Climax.

Others are Amstel Malta, Amstel Malta Ultra, ZAGG, Maltina, Malta Goldberg lager, Malta Gold malt drink, Life Continental lager, Hi-Malt, and fayrouz brands. It also provides Climax herbal energy drink and spirits

BUA Foods

BUA Foods’ interest expense increased to N7.11 billion in Q1 2024 from N1.88 billion in the same period of 2023. The firm operates as a food and fast-moving consumer goods company. It processes, manufactures, and distributes food products such as flour and pasta, sugar, refined oil, and rice.

Dangote Cement

Dangote Cement’s interest expense rose to N4.88 billion in Q1 2024 from N4.42 billion in the same period of 2023.

The firm is a Nigerian publicly traded multinational cement manufacturer headquartered in Lagos. It is engaged in the manufacture, preparation, import, packaging, and distribution of cement and related products in Nigeria, and has plants or import terminals in nine other African countries.

International Breweries

International Breweries’ interest expense rose to N8.31 billion in Q1 2024 from N3.48 billion in the same period of 2023.

It is a Nigeria-based brewing company. The principal activities of the Company are brewing, packaging, and marketing of beer, alcoholic flavored/non-alcoholic beverages, and soft drinks. The firm’s geographical segment includes Nigeria with brands that include Budweiser, Trophy Lager, and Trophy Stout. It has four breweries, which are located in different parts of Nigeria.

BUA Cement

BUA Cement’s interest expense rose to N4.88 billion in Q1 2024 from N4.42 billion in the same period of 2023.

The firm is engaged in the manufacturing and marketing of cement products. It offers its products under the brand name BUA Cement. The company was founded in 2008 and is headquartered in Lagos, Nigeria.


Unilever’s interest expense grew to N1.43 billion in Q1 2024 from N0.35 billion in the same period of 2023. The firm manufactures and markets a range of food and food ingredients as well as home and personal care products for the wholesale and retail sectors in Nigeria.

Its product portfolio encompasses toothpastes, soaps, washing detergents, dishwashing liquids, baby products, lotions and petroleum jelly, margarine, tea, and bouillon cubes.


NASCON’s interest expense stood at N0.38 billion in Q1 2024, up from N0.26 billion in the same period of 2023. It is a Nigeria-based company that is engaged in the processing of raw salt into refined, edible, and graded salt.

The company’s products include salt, seasoning, and spices. Its salt products include table salt, pure dried and vacuum (PDV) salt, tannery salt, butter salt, edible industrial salt, and non-edible industrial salt.