The corporate Nigeria has continued to struggle under the weight of high funding costs, with at least 20 major companies, including MTN Nigeria, Dangote Cement, Seplat Energy Plc, and Oando Plc, incurring a combined finance cost of about N2.1 trillion in 2025.
The figure represents a slight increase of 0.99 per cent from the N2.05 trillion recorded by the same firms in 2024, underscoring the persistent impact of high borrowing costs on business operations across key sectors of the economy.
Finance costs typically include a range of debt-related obligations, such as loan servicing, interest on lease liabilities, and interest payments on commercial paper and other financing instruments used by companies to fund expansion and operations.
There was a marginal easing of monetary policy by the Central Bank of Nigeria (CBN), which recently reduced its benchmark interest rate to 27 per cent from 27.50 per cent.
The rising cost of debt has become a defining challenge for businesses in Nigeria in recent years, largely driven by the CBN’s aggressive monetary tightening aimed at curbing inflation and stabilising the naira in the foreign exchange market.
However, while the policy stance was designed to restore macroeconomic stability, it had also made borrowing significantly more expensive for companies, forcing many to allocate a larger share of their revenue to servicing debt.
Industry analysts said the situation had been worsened by declining consumer purchasing power, which limited companies’ ability to pass rising costs on to consumers.
The result was a difficult operating climate marked by rising finance costs, shrinking profit margins, and weaker earnings across several industries.
An investigation by THISDAY covering 20 companies across sectors such as oil and gas, telecommunications, fast-moving consumer goods (FMCG), cement manufacturing, power generation, and brewing revealed that a handful of firms accounted for a substantial share of the total finance burden.
Among the companies reviewed, MTN Nigeria Communications Plc recorded the highest finance cost in 2025.
The telecommunications giant posted N524.91 billion in finance expenses, representing an increase of about 22 per cent compared with N431.65 billion reported in 2024.
The increase was largely attributable to higher lease liabilities associated with extended tower lease arrangements and rising infrastructure financing costs.
Following closely behind was Oando Plc, which reported finance costs of N465.4 billion in 2025, reflecting a sharp 97.3 per cent increase from N235.84 billion in the corresponding period of 2024.
In the cement sector, Dangote Cement Plc recorded finance costs of N351.5 billion in 2025.
Although the figure remains substantial, it represents a significant drop of nearly 50 per cent compared with the N700.3 billion declared in 2024, suggesting a reduction in debt exposure or changes in financing structures.
Similarly, Seplat Energy Plc posted finance costs of N281.21 billion in 2025, representing an increase of about 103 per cent from N138.7 billion reported in 2024.
Across the corporate sector, rising borrowing costs have continued to weigh heavily on profitability and shareholder returns.
Companies have had to devote a larger portion of their operating income to servicing debt, reducing the funds available for expansion, investment, and dividend payments.
Data from the CBN’s latest Money Market Indicators showed that the average maximum lending rate in Nigeria’s banking sector stood at 29.32 per cent in December 2025, slightly lower than the 29.71 per cent recorded in December 2024.
The decline followed the decision of the CBN’s Monetary Policy Committee (MPC) to lower the Monetary Policy Rate (MPR)—the benchmark interest rate used to guide lending conditions in the economy—to 27 per cent in 2025.
The maximum lending rate represents the average of the highest interest rates charged by deposit money banks and typically reflects prevailing monetary policy conditions.
In December 2024, when the MPC decided to retain the MPR at 27.50 per cent, the maximum lending rate stood at 29.71 per cent.
Earlier in 2024, the rate had risen sharply as the CBN intensified its fight against inflation and currency volatility.
For instance, the CBN’s money market indicators showed that the average maximum lending rate stood at 27.07 per cent in January 2024 when the MPR was at 18.75 per cent.
By March of that year, the lending rate had climbed to 29.38 per cent as the benchmark interest rate rose to 24.75 per cent.
The upward trend continued later in the year. When the MPR increased from 26.75 per cent in August 2024 to 27.25 per cent in September 2024, the average maximum lending rate also rose from 29.93 per cent to 30.21 per cent during the same period.
The sharp increase in borrowing costs had raised concerns among analysts about the availability of credit for businesses already grappling with economic reforms, such as the federal government’s unification of the foreign exchange market and the removal of petrol subsidies.
Historically, lending rates in Nigeria have experienced significant volatility.
Data showed that the lending rate of the banking sector averaged about 14.17 per cent between 1961 and 2024.
The rate reached an all-time high of 37.80 per cent in September 1993 and fell to a record low of six per cent in April 1975.
More recently, in 2020, the average maximum lending rate peaked at 30.73 per cent even though the MPR at the time stood at 13.5 per cent.
Despite the recent reduction in the benchmark rate, analysts warned that lending rates may remain elevated in the near term, depending on inflation trends and banks’ funding costs.
Commenting on the trend, investment banker and stockbroker Tajudeen Olayinka said commercial banks typically adjust their lending rates based on internal funding costs and prevailing market conditions rather than relying solely on the MPR.
According to him, the benchmark interest rate mainly serves as a signal of the general direction of interest rates in the economy.
“Banks review their lending rates regularly based on their cost of funds and the direction of interest rates in the market,” he said.
“The deposit mix of each bank, including idle customer deposits, determines their weighted average cost of funds, which they use in determining their prime lending rates.”
Kayode Tokede
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