The financial burden of twelve listed manufacturing companies on the Nigerian Exchange Group (NGX) escalated significantly in the first half of 2024, revealing the adverse effects of rising benchmark interest rates.
Led by Dangote Cement, the group of manufacturers reported total finance costs of N476.54 billion by mid-2024, a staggering 134% increase from N203.28 billion in the same period the previous year, reflecting a rise of N273.26 billion.
The Central Bank of Nigeria (CBN) has steadily raised the Monetary Policy Rate (MPR) in its efforts to curb inflation. Between June 2023 and July 2023, the MPR climbed from 18.5% to 26.75%, resulting in higher borrowing expenses for businesses and households.
Dele Oye, President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), warned of the broader implications of such rate hikes. He noted that higher borrowing costs could stifle investments, reduce consumer spending, and create liquidity challenges for businesses.
Company-Specific Impacts:
- Dangote Cement: Finance costs rose to N332.52 billion in H1 2024, surpassing the N310.96 billion incurred throughout 2023 and marking a 106% increase from N163.05 billion in H1 2023.
- Guinness Nigeria: Incurred N90 billion in finance costs, a sharp 872% rise from N9.28 billion in H1 2023.
- Notore Chemical Industries: Reported N24.22 billion in finance costs, reflecting a 64% increase from N14.74 billion in the prior year.
- Transcorp: Recorded N7.55 billion in finance costs, an 11% decline compared to N8.46 billion in H1 2023.
- Okomu Oil Palm: Finance costs surged by 516% to N7.44 billion, compared to N1.21 billion in H1 2023.
- Transcorp Power: Experienced a 24% increase in finance costs, rising from N3.21 billion in June 2023 to N3.98 billion in mid-2024.
- PZ Cussons: Saw an extraordinary 1,061% jump in finance costs, from N334.96 million in H1 2023 to N3.89 billion in 2024.
- Vitafoam: Reported a 342% increase, with costs rising from N464.94 million in 2023 to N2.68 billion in 2024.
- John Holt: Costs rose by 13%, from N96.3 million to N109.3 million.
- Northern Nigeria Flour Mills: Finance costs increased from N5.42 million to N19.87 million, marking substantial growth.
Inflation has also intensified, with the headline rate climbing to 34.19% in June 2024. Food inflation reached 40.87%, while core inflation stood at 27.4% year-on-year.
The CBN responded by raising the MPR by 50 basis points to 26.75% during its most recent Monetary Policy Committee meeting. Other measures included maintaining the Cash Reserve Ratio for deposit money banks at 45% and the liquidity ratio at 30%.
