Nigerian Corporates Grapple with Soaring Interest Expenses in 2024 as CBN Tightening Strains Bottom Lines

LAGOS, Nigeria — In 2024, Nigerian companies came under intense financial pressure as surging interest expenses, triggered by the Central Bank of Nigeria’s (CBN) aggressive monetary tightening, significantly squeezed profitability across sectors.

A detailed analysis of the audited financial statements of 10 listed Nigerian firms reveals a troubling trend: collectively, these companies incurred ₦1.416 trillion in interest expenses, reflecting a staggering 146% year-on-year increase.

This ballooning cost of debt now accounts for 36% of their combined operating profit (₦3.93 trillion), raising red flags about corporate financial health and long-term sustainability in a high-rate environment.

Why Interest Costs Are Rising

The CBN raised benchmark interest rates multiple times throughout 2024 to combat inflation and stabilize the naira. While effective in curbing macroeconomic volatility, the move has pushed borrowing costs for businesses to multi-year highs.

Key contributing factors:

Benchmark interest rates surged above 25%
Commercial loan rates jumped to 30–35% range
Companies took on more debt to fund operations and expansion amid rising costs

As a result, Nigeria’s largest firms are now struggling to manage debt servicing, with many experiencing declining interest coverage ratios and eroding profit margins.

Company-by-Company Breakdown: Who Felt It the Most?

1. Dangote Cement – ₦448.08 Billion Interest Expense (🔺210%)

Total debt surged from ₦971 billion to ₦2.51 trillion
Interest rates jumped from 17% to over 25%
Interest coverage ratio fell from 5.08x to 2.57x
Net debt-to-equity nearly tripled, rising to 0.95

Verdict: The most affected, with interest costs taking a heavy toll on earnings and financial leverage.

2. MTN Nigeria – ₦422.94 Billion Interest Expense

Lease obligations contributed ₦250.87 billion
Despite a 17% drop in total loans, higher rates led to cost increases
Interest coverage ratio dropped to 1.84x
Suffered ₦925.36 billion in FX losses, resulting in a ₦550 billion pre-tax loss

Stock Update: Up 22.5% YTD in 2025, rebounding from last year’s dip.

3. Seplat Energy – ₦127.00 Billion Interest Expense

Borrowed $650 million via two credit facilities
Loan book expanded from ₦679.4 billion to ₦2.10 trillion
Interest coverage improved to 5.10x, with expenses only 19.6% of operating profit
EPS up 316% to ₦386.61

Verdict: Strong operational performance helped offset financial pressure.

4. Nestlé Nigeria – ₦101.82 Billion Interest Expense (🔺169%)

Loans rose to ₦653.70 billion
FX losses of ₦291 billion drove a ₦221.59 billion pre-tax loss
Interest costs exceeded 60% of operating profit
Interest coverage fell to 1.67x

Verdict: Severely hit by both debt and currency devaluation.

5. Nigerian Breweries – ₦98.01 Billion Interest Expense

Minor interest expense growth (0.28%), but operating profit coverage worsened
Interest costs 40% higher than operating profit
Pre-tax loss widened to ₦182.9 billion
Interest coverage dropped to 0.71x

Verdict: In deep financial strain, further weighed down by ₦158 billion FX losses.

Other Notable Mentions

Company	Interest Expense (₦ Billion)
Dangote Sugar	92.37
BUA Cement	56.11
BUA Foods	29.91
Aradel Holdings	22.21
Lafarge Africa (WAPCO)	17.89

These firms also reported increased finance costs, underscoring a sector-wide burden of debt servicing in the current macroeconomic environment.

Macroeconomic Trends Shaping Corporate Finance in Nigeria

CBN rate hikes aimed at curbing inflation raised borrowing costs
Companies, already battling FX volatility, increased debt exposure
Interest expenses now eroding corporate profits and shareholder returns
Firms in consumer goods and telecoms are the most vulnerable due to thin margins and FX dependency

Key Financial Ratios to Watch

Interest Coverage Ratio – Measures ability to cover interest with operating income
- A ratio below 1.5x signals high default risk
Net Debt-to-Equity Ratio – Indicates leverage
- Rapid increases signal growing solvency risk
FX Losses – Companies with high foreign currency obligations are more exposed to naira devaluation

Conclusion: Investor Takeaways

The 2024 financial year highlighted how vulnerable Nigerian companies are to interest rate spikes and currency shocks. While energy players like Seplat showed resilience, many consumer and industrial firms suffered sharp earnings erosion due to rising debt costs and macro headwinds.

Investors must now pay close attention to: