Nigeria’s biggest listed companies are grappling with a painful paradox: paying sharply higher interest bills even as they shrink their debt piles.
A year of elevated borrowing costs, stubborn inflation and tighter monetary policy has turned debt servicing into one of the most punishing line items on corporate income statements.
The Central Bank of Nigeria’s (CBN) aggressive tightening campaign which has driven the Monetary Policy Rate to 27.5 % as of July 2025 has kept naira borrowing costs at multi-decade highs.
The CBN has made clear that policy will remain tight until inflation, still in the high twenties, shows decisive signs of cooling.
The consequence for Nigeria’s corporate sector has been stark.
An analysis of ten large companies across cement, oil and gas, and consumer goods shows aggregate interest expenses surging 31% year-on-year in the first half of 2025 from N411 billion to N538.5 billion even though total borrowings fell nearly 10 % to N6.49 trillion.
The figures underline the squeeze: corporates are paying more for smaller debt balances, with the most heavily leveraged players feeling the sharpest pain.
Some companies, however, have bucked the trend. BUA Foods slashed finance costs by almost half after reducing borrowings by close to 20 %.
Nigerian Breweries and Nestlé also posted double-digit declines, aided by strategic repayments and stronger cash flows.
The pressure from rising finance costs becomes critical when profits fail to keep pace and here, the interest coverage ratio provides a telling gauge.
Nestlé improved its ratio from 1.16x to 2.82x, while Cadbury staged a dramatic turnaround, leaping from 1.77x to 7.63x on stronger operating profits.
Yet the story is not one of uniform strain. Beneath the higher finance costs, several Nigerian corporates have turned in remarkable improvements in operating cash generation and profitability in some cases recovering sharply from losses in 2024.
Even companies that saw modest or flat cash flow growth such as Presco and Okomu Oil maintained robust margins thanks to disciplined cost controls and favourable commodity prices.
For now, the CBN has given no signal of imminent rate cuts, suggesting that elevated finance costs will remain a fixture through 2025.
Relative stability in the foreign exchange market has helped reduce FX losses a bright spot in otherwise constrained profit and loss statements but the underlying cost of naira debt remains punishing.
For Nigeria’s capital-intensive corporates, the challenge is clear: debt efficiency, disciplined capital allocation and robust cash generation will be the difference between defending margins and watching them erode.
For Nigeria’s capital-intensive corporates, the challenge is clear: debt efficiency, disciplined capital allocation and robust cash generation will be the difference between defending margins and watching them erode.
In a high-rate, high-inflation economy, expensive money is not just a macroeconomic condition it is a competitive battleground.