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.
Paying more for less debt
The figures underline the squeeze: corporates are paying more for smaller debt balances, with the most heavily leveraged players feeling the sharpest pain.
- BUA Cement, for instance, recorded a 250%jump in interest costs despite trimming borrowings slightly.
- Seplat Energy saw finance costs more than double (+141 %) after cutting debt by a fifth.
- Dangote Cement, with the largest debt load in the sample at N2.4 trillion, faced a near-65 % increase in interest expenses.
- Even smaller-cap names were hit. Lafarge’s interest bill more than tripled from a small base, while Aradel Holdings saw a 49 % rise linked to upstream oil investments.
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 real test: affordability
The pressure from rising finance costs becomes critical when profits fail to keep pace and here, the interest coverage ratio provides a telling gauge.
- On aggregate, coverage for the ten companies fell from 24 times to 17 times year-on-year still well above danger levels, but masking significant divergences.
- Healthy coverage is generally seen above 3 times, yet several names are now hovering close to that threshold.
- Dangote Cement slipped from 4.24x to 3.78x, Seplat from 5.65x to 4.94x, and BUA Cement from 7.53x to 6.44x.
- Nigerian Breweries dropped below the caution zone, sliding from 3.57x to 2.39x, while Dangote Sugar remains in distress at just 0.59x meaning earnings cover barely half its annual interest bill.
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.
Strong cash flows defy financing pressures
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.
- MTN Nigeria swung from a N518 billion loss in H1 2024 to a N415 billion profit this year, while boosting operating cash flows from N533 billion to nearly N956 billion.
- Dangote Cement’s profit more than doubled to N520 billion, alongside a surge in operating cash flow to N874 billion.
- In the energy sector, Seplat’s cash generation soared from N235 billion to N755 billion, despite a dip in profit, underscoring the strength of upstream operations in the current oil price environment.
- Consumer goods companies also showed resilience: Nestlé flipped from a N177 billion loss to a N51 billion profit, with cash flow swinging from negative to N188 billion, while BUA Cement’s profits quintupled to N181 billion.
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.
An era of expensive money
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.
In a high-rate, high-inflation economy, expensive money is not just a macroeconomic condition it is a competitive battleground.
