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Higher prices loom as businesses rely more on loans to survive

Published

2 years ago

February 12, 2024

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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.

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 Monetary Policy Rate, MPR regime, sustained by the Central Bank of Nigeria, CBN throughout the review period in order to tame inflation that rose to 28.92 % as 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 cost of operating capital is now rising, a situation that will impact their profit negatively, and also restrict their ability to pay higher dividend.

Financial information from 17 leading manufacturing companies listed on the Nigerian Exchange Limited, NGX, showed that the finance cost (interest on borrowing) rose by a significant 332.3% percent to N589.623billion in 9M’23 from N136.379 billion in 9M’22.

The companies include: Nigerian Breweries, Dangote Cement, Lafarge Africa, Guinness Nigeria, Gsk, Beta Glass, Unilever Nigeria, Dangote Sugar, Okomu Oil.

Others are Nestle Nigeria, BUA Cement, Notore Chemicals, NASCON Allied Industries, Cadbury Nigeria, BUA Foods, Vitafoam Nigeria and International Breweries.

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.

International 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.

Analysts’ insight

Victor Chiazor, Analyst and Head of Research & Investment at FSL Securities Limited said: “The manufacturing sector will continue to be negatively impacted by the high finance cost, especially given that the banks all responded to the high MPR. Until the Benchmark interest rate is reduced by the CBN, the banks won’t drop their interest rate and the high interest expense will continue to weaken the profitability of manufacturing companies and even throw some of them into loss positions.

“In the course of the year, if we see inflation taper down, the MPC team may begin to ease its hawkish stance and drop the MPR which should lead to a gradual drop in interest rates. However if rates remain high, the real sector of the economy will continue to struggle as the interest rates would be too expensive for businesses to thrive.

Also, though expensive, the option of raising equity capital remains viable especially for those who have impressive earning forecast, strong business model and a compelling story to tell. In the course of the year we may see one or two manufacturing companies raise equity capital from the capital market to support their businesses.”

Commenting on the cost of borrowing, he said: “The astronomical jump in finance cost relative to a midsize increase in actual borrowings by these public companies in a 9-month period of 2023 could have been due to multiplicity of factors around inflation: depreciation of the Naira; re-pricing of loans and other assets by lenders; high input cost; reduction or non availability of suppliers’ credit; etc.

The result of this is more inflationary pressure, as the affected companies are pressured to re-price their earning assets to recover costs or reduce losses.”

On government rendering support to the manufacturing sector, he said: “The government may not be able to assist every sector, except for a few companies who have benefited from CBN intervention funds and single digit interest rate borrowing, most are exposed to more of bank borrowing which will be highly toxic to business operations if interest rates remain elevated.”

Reacting to the increase in borrowing, David Adonri, analyst and Executive Chairman at Highcap Securities Limited, said: ” The manufacturing industry was first battered by the rising inflation throughout year 2023 which escalated their costs. Due to decline in purchasing power of consumers their cost recovery efforts failed to preserve their working capital. Hence, their resort to higher bank credit to keep them alive. With higher credit, finance cost will escalate.

“The second reason behind the balloon of their finance cost is the collateral damage they suffered from floating of the Naira. Their hard currency liability exposures magnified in multiple folds when the Naira suffered heavy depreciation. As a result, they had to borrow more money locally, to meet outstanding obligations.

This year, the factors that pressured them into excessive borrowing may not be replicated. The economy is expected to readjust to a new price level where prices will be more stable. However, to repair their damaged balance sheets, manufacturers may need to refinance their huge debt through the capital market.”

On how government intervention can aid manufacturers, Adonri, said: “The administrative intervention of government in the credit market through CBN has not been very effective. It continues to distort the market mechanism that ought to efficiently allocate credit in the economy. The interventions have also not been appropriately directed to the foundational sectors of the economy.

Fiscal intervention can be by way of subsidy to manufacturers to enhance production while monetary policy should target low interest rate environment. If manufacturing inputs can be internalized through appropriate fiscal measures, then manufacturing cost can reduce to the point where finance cost will become negligible.”

Commenting on the borrowings by manufacturing companies, an investment expert and CEO, Wyoming Capital and Partners, Tajudeen Olayinka, said: “Companies can borrow to improve production capacity and reduce average cost. Where this is the case, such borrowing is considered positive, and could improve fortunes of shareholders of the company. Where such borrowing does not improve production efficiency, it can become negative to the value of the company and make shareholders worse off. This is what most companies try to consider before borrowing from short-term money market or long-term capital market.”

On the benefits of borrowing by manufacturing companies, he said: “Borrowing that improves operational efficiency would naturally benefit customers and other stakeholders. Borrowing must be done to improve shareholders wealth; and customers must have been given thoughtful consideration before embarking on such borrowing.”

However, he lamented that, “Short-term borrowing from banks could be more expensive at this time, especially if we consider the effect of rising inflation and interest rate hike by Monetary Policy Committee of CBN, which has compelled many banks to re-price loans and other financial instruments, leading to higher borrowing costs for firms and public companies. Borrowing from banks could be more problematic at this time.

Regardless of cost implications to public companies, short-term borrowings from banks might have been provided as bridging facilities for more flexible long-term capital already arranged by those companies, or as a way of obtaining working capital. It could also be a sign of weakness in annexing suppliers’ credit by some of those companies.”

On whether the government can aid manufacturers, Adeyinka said: “That could be another way of asking the government to provide financial subsidy, when they are already enmeshed in a fiscal crisis. I think the best way is to allow the market to function, so that assets are properly priced in the long-term interest of the economy.”

News

ISWAP Snr Finance Chief Surrenders With Two Sons, AK-47 as 46 Terrorists, Families Lay Down Arms – Army

Published

31 minutes ago

July 26, 2026

EMMANUEL AGAJI

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A senior finance commander of the Islamic State West Africa Province (ISWAP) has surrendered to troops of the Nigerian Army alongside his two sons and an AK-47 rifle, in what military authorities described as another significant breakthrough in the ongoing counter-insurgency campaign in the North-East.

The Army revealed that the high-ranking ISWAP operative was among 46 terrorists and their family members who voluntarily laid down their arms following sustained military offensives against insurgent strongholds.

According to military authorities, the surrender is part of the continued success of coordinated land and air operations that have weakened the operational capabilities of terrorist groups across Borno State and adjoining areas.

The surrendered individuals reportedly included fighters, women and children, with the senior ISWAP finance chief arriving with his two sons and a serviceable AK-47 rifle.

Military sources said preliminary intelligence indicates that persistent offensives, destruction of terrorist logistics bases, and mounting pressure from troops have continued to force insurgents to abandon their camps and surrender.

The Nigerian Army reaffirmed its commitment to sustaining ongoing operations aimed at dismantling terrorist networks, restoring peace to affected communities, and encouraging more insurgents willing to renounce violence to surrender through established deradicalisation and rehabilitation programmes.

Security analysts have described the latest surrender as another indication that sustained military pressure is disrupting the command structure and financial operations of terrorist organisations operating in the North-East.

News

SAD! Absucted victims, 2 babies born in terrorists’ camp d*e

Published

40 minutes ago

July 26, 2026

Kayode Sanni-Arewa

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By Kayode Sanni-Arewa

No fewer than seven victims abducted during the April attack on worshippers in Ariko community, Kachia Local Government Area of Kaduna State, have reportedly died in captivity, as fresh accounts from a recently freed captive paint a grim picture of worsening humanitarian conditions inside a terrorists’ camp where dozens of residents have now spent more than three months.

The latest revelation was made by former media aide to the late Kaduna State Governor, Sir Patrick Ibrahim Yakowa, Mr. Reuben Buhari, in a post on his Facebook page, citing information obtained from one of the victims who recently regained freedom. Blueprint reports

According to Buhari, the freed captive disclosed that seven of the 37 persons kidnapped from Ariko village have died since they were taken away during the Easter Sunday attack.

The deceased were said to include two men, two women and three children.

*Bodies allegedly dumped on hillside*

According to the survivor’s account, the deceased victims were not given proper burials.

Instead, the bodies were allegedly dragged to a nearby slope and abandoned.

Buhari also shared a photograph of the 37 abducted worshippers which he said was released by the kidnappers six days after the abduction, identifying one of the men in the image as among those who had reportedly died in captivity.

The latest account could not be independently verified as of the time of filing this report.

*Babies born in captivity do not survive*

The survivor also disclosed that the baby delivered by one of the abducted women inside the terrorists’ camp has died.

The birth had earlier drawn widespread attention after another escapee recounted how fellow female captives were forced to assist the woman during labour without medical supplies or professional care.

According to the earlier testimony, the captors allegedly refused to provide a knife or blade to cut the baby’s umbilical cord, forcing one of the women to use her teeth.

The newborn reportedly survived for almost three weeks before dying in the camp.

The latest account further revealed that another pregnant woman abducted from Awon village on April 20 also gave birth while in captivity about two weeks ago.

However, the baby reportedly died the following day.

The 11 victims abducted from Awon village are now said to be held in the same camp as the Ariko victims.

*Victims sleep in the open*

The recently freed captive described extremely harsh living conditions inside the camp.

According to the account, the abductees sleep in the open without any form of shelter, leaving them exposed to rain, cold and harsh weather conditions.
Whenever it rains, they are said to spend the night on wet ground.

The survivor added that many of the remaining children in captivity are ill, with deteriorating health conditions caused by prolonged exposure, hunger and lack of medical attention.

Earlier testimonies from other escapees had also described widespread malnutrition, skin infections and poor sanitation inside the camp.

One 65-year-old woman who escaped after spending 54 days in captivity had narrated how captives survived on boiled leaves, mangoes and stream water, while many were deliberately kept barefoot to prevent escape attempts.

She eventually regained freedom after trekking barefoot through the forest for three days.

*More than 100 days in captivity*

According to Buhari, the 37 victims abducted from Ariko village have now spent 110 days in captivity, while the 11 residents kidnapped from neighbouring Awon village have remained in the same camp for 95 days.

He appealed to Nigerians to continue praying for the victims and their families, expressing hope that they would soon regain their freedom.

The latest development comes amid persistent attacks on communities in Kachia Local Government Area.

Only recently, terrorists invaded Ungwan Atiku village, killing one resident and abducting 11 others, including three nursing mothers and their suckling babies, further deepening concerns over the worsening security situation in Southern Kaduna.

Residents have repeatedly called on security agencies to intensify rescue operations and dismantle criminal camps operating in forests across the area to secure the release of those still being held.

Efforts to obtain the reaction of the Kaduna State Police Command were unsuccessful, as the Command’s Public Relations Officer, DSP Mansir Hassan, neither answered telephone calls nor responded to a text message seeking his comments before this report was filed.

News

Heavy haul: N10bn Cocaine, Loud, opioids intercepted at Lagos ports(PHOTOS)

Published

2 hours ago

July 26, 2026

EMMANUEL AGAJI

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…as NDLEA nabs kingpins
. Recovers 401 military grade ammunition concealed in palm oil kegs, others in Kaduna, Katsina; seizes UK-bound tramadol consignment in black soup containers

A 55-year-old businessman, Onuigbo Ndubisi Chinedu who deals in clothing at the popular Balogun market, Lagos Island, has been arrested by operatives of the National Drug Law Enforcement Agency (NDLEA) over attempt to export 3.30 kilograms of cocaine concealed in walls of cartons used to package foodstuffs going to the United kingdom.
Onuigbo was arrested on Thursday 23rd July 2026 following the interception of his cocaine consignment at the export shed of the Lagos airport the previous day, Wednesday 22nd July by NDLEA operatives. In the course of investigation, three cargo agents: Nkwor Onyekachukwu Justina; Adeleke Abiola Taoheed; and Ukanwa Grace Pilgrim, who handled the shipment were initially arrested leading to the arrest Kenneth Okakpu who delivered the consignment to the cargo agents for shipment to the UK.
Okakpu’s arrest provided the lead to identifying Onuigbo as the kingpin behind the syndicate and his eventually arrest while attempting to send another consignment of cocaine to the UK.

A 31-year-old entrepreneur Emmanuella Chukwu-Edo also involved in illicit drug trafficking was on Tuesday 21st July arrested at her Surulere Lagos residence by NDLEA operatives following the seizure of her consignment of 2.80kg Loud, a synthetic strain of cannabis, which arrived from the United States aboard a United Airlines flight on Monday 20th July.
In another interdiction operation at the Lagos airport, a total of Two Million Two Hundred and Forty (2,240,000,000) pills of Tapentadol 250mg worth over N2.2 billion in street value were recovered from a shipment from India aboard an Air Maroc flight during a joint examination of the cargo on Friday 24th July. The exercise was based on an intelligence received and processed by NDLEA. This came on the heels of the seizure of a consignment of tramadol buried in containers of black soap heading to the UK. The shipment was intercepted by NDLEA operatives at a courier firm in Lagos on Wednesday 22nd July.

At the Apapa seaport in Lagos, a container of three vehicles used to conceal a total number of 4,777 sachets of Canadian Loud weighing 2,388.5kg worth over N7.1 billion in street value, was uncovered during a joint examination of the shipment on Monday 20th July.
A suspect Mustapha Sani, 30, was on Wednesday 22nd July nabbed by NDLEA operatives
on patrol operation at Baure, Safana LGA, Katsina state where he was found with 323 rounds of military grade ammunition consisting of 200 pieces of 7.62mm and 123 rounds of 7.6mm neatly concealed.

Another suspect, Abubakar Amadu, 30, was arrested by NDLEA officers on stop and search operation at Jere, along Abuja-Kaduna expressway where he was found with 73 RLA, 7.62mm ammunition hidden in kegs of red oil. Both suspects have been handed over to the relevant security agency for further investigation.

In Edo state, raid operations at Ilushi community, Esan South East LGA, on Sunday 19th July led to the seizure of 1,286kg cannabis and 86kg cannabis seeds from a warehouse while Ojore Onweze, 45, was caught with 60kg skunk and George Agwumede, 30, nabbed with 13kg of the same substance.

With the same vigour, Commands and formations of the Agency across the country continued their War Against Drug Abuse (WADA) sensitization activities to schools, worship centres, work places and communities among others in the past week. These include: WADA sensitization lecture to students and staff of Government Day Secondary School, Sabon Wuse, Niger state; Government Girls Secondary School, Shekara, Kano; and Otto Primary School, Ebute Metta, Lagos state, among others.

While commending the officers and men of DOGI, MMIA, Apapa, Edo, Kaduna, and Katsina Commands for the various successful operations, Chairman/Chief Executive Officer of NDLEA, Brig. Gen. Mohamed Buba Marwa (rtd) enjoined them and their colleagues across the country to continue with the ongoing balanced approach to the drug control efforts of the Agency.