Financial information from 17 leading manufacturing companies listed on the Nigerian Exchange Limited, NGX, showed that the finance cost (interest on Loans) rose by a significant 332.3 percent to N589.623billion in 9M’23 from N136.379 billion in 9M’22.
Nigerian Breweries, Dangote Cement, Lafarge Africa, Guinness Nigeria, Gsk, Beta Glass, Unilever Nigeria, Dangote Sugar, Okomu Oil are all on NGX list.
Others are Nestle Nigeria, BUA Cement, Notore Chemicals, NASCON Allied Industries, Cadbury Nigeria, BUA Foods, Vitafoam Nigeria and International Breweries.
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Nigerians will soon experience another wave of increases in the prices of goods by major manufacturers as most of them now depend more on loans to fund their operations, resulting in higher interest payments and increased cost of production.
According to Financial Vanguard investigations show that due to scarcity of foreign exchange, general cash flow challenges, and other economic headwinds during the period, major manufacturing firms sustained their businesses with bank loans amounting N1.833 trillion in the nine months of the year 2023 , 9M’23.
The amount indicates increased borrowing of about 52.6% higher than the N1.2 trillion in the corresponding period of 9M’22.
Financial experts say the companies may have ended up in a debt trap following the rise in the Monetary Policy Rate, MPR regime, sustained by the Central Bank of Nigeria, CBN throughout the review period to tame inflation that rose to 28.92 % at December 2023, a development that triggered rising lending rates across the banking and finance sector.
This development, according to financial experts, indicates that the companies that borrowed huge in the 9M’23 are now caught in a serious debt situation as the cost of operating capital is now rising, a situation that will impact their profit negatively, and also restrict their ability to pay higher dividend.
Analysts and investment experts have decried the high cost of borrowing from the banks, saying that the capital market remains the best financing option for manufacturers to run on long-term funds.
Nigerian Breweries led the borrowing chart in absolute term recording N323.25 billion in 9M’23 from N148.99 billion in 9M’22. It was followed by Nigeria Breweries whose borrowing rose to N307.99 billion from N113.69 billion in the corresponding year 2022.
Dangote Cement occupied the third position posting N267.13 billion from N269.19 billion in 9M’22. It was followed by BUA Cement occupying the fourth position as its borrowings rose to N258.26 billion from N97.46 billion while BUA Foods followed as its borrowings surged to N 237.79 billion as against N211.67 billion in 9M’22.#Loans