According to statistics, Cadbury Nigeria Plc, Nestlé Nigeria Plc, and Lafarge Africa Plc were the three manufacturers with the biggest increases in borrowing or finance costs in the first three months of 2024.
According to the firms’ latest financial reports, Cadbury, Nestle, and Lafarge Africa’s finance expenditures increased by 6,757.9 percent, 3,997.4 percent, and 3,336.01 percent, respectively, on an annual basis.
The costs, interests, and other fees associated with borrowing money to construct or buy assets are referred to as financing costs or the cost of financing.
A further review shows that the total financing costs of the 11 manufacturing companies in Q1 were N550.2 billion, up 771 percent from N63.18 billion at the same time last year.
Ayorinde Akinloye, an investor relations analyst based in Lagos, pointed out that “many consumer firms had higher finance costs because of FX losses and higher interest rates.” “Some experienced a decline in profit while others experienced huge losses despite their good operating performance.”
In terms of finance cost increase, the company recorded 1,419.9 percent, Following Dangote Sugar Refinery Plc (611.74 percent), Nigerian Breweries Plc (284.32 percent), and Unilever Nigeria Plc (279.49 percent).
The financing cost growth rates for Dangote Cement Plc Plc, International Breweries, NASCON Allied Industries Plc, and BUA Cement Plc were 279.08 percent, 110.48 percent, 47.22 percent, and 10.41 percent, respectively.
According to Gabriel Idahosa, president of the Lagos Chamber of Commerce and Industry, the cost of borrowing is more significant since all banks have reassessed their interest rates by changes in monetary policy.
With the amount of operating capital required and the exchange rate linked, he said, “the cost of borrowing has been going up very quickly, and there’s a need to borrow more naira.”
In March, the Central Bank of Nigeria (CBN) increased the monetary policy rate by 200 basis points to 24.75 percent, marking the second consecutive increase. The aim was to combat inflation. The CBN raised the interest rate to 22.75 percent in February, a 400-basis-point rise.
The premier bank raised the rate by 750 basis points to 18.75 percent last July from 11.25 percent in March 2022 before climbing to 24.75 percent.
Nestle Nigeria faced a substantial surge in finance costs, escalating from N5.34 billion to N218.8 billion in the first quarter of 2024. The company, a subsidiary of Nestle’s global food and beverage giant, operates in various segments such as food, beverages, and healthcare nutrition, contributing significantly to Nigeria’s consumer goods sector.
NASCON Allied Industries is a publicly listed food and beverage specialty company based in Lagos. It is primarily owned by a Swiss-based holding company with ties to the Tolaram Group. Founded in 1961, it initially traded under the name Nestle Products Nigeria Limited.
Dangote Cement, a Nigerian multinational cement manufacturer headquartered in Lagos, witnessed a significant rise in finance costs, from N32.5 billion to N123.2 billion in the first quarter of 2024. The company manufactures, imports, packages, and distributes cement and related products across Nigeria and several other African countries.
Dangote Sugar Refinery experienced a substantial increase in finance costs, soaring from N8.06 billion to N122.5 billion in Q1 2024. The company operates in the sugar refining sector, significantly influencing Nigeria’s sugar industry landscape.
In the first quarter of 2024, NASCON Allied Industries experienced a notable increase in finance costs, rising from N0.18 billion to N0.27 billion compared to the same period in 2023. NASCON is a Nigerian company specializing in processing raw salt into refined, edible, and graded salt and other products such as seasoning and spices. Their salt products range from table salt to industrial varieties, catering to both edible and non-edible applications.
