A significant financial burden has been placed on corporate Nigeria, with at least 20 major companies, such as MTN Nigeria, Dangote Cement, Seplat Energy Plc, and Oando Plc, collectively spending around N2.1 trillion on finance costs in 2025. This amount shows a minor increase of 0.99 per cent from the N2.05 trillion recorded by these same entities in 2024, emphasizing the ongoing impact of elevated borrowing expenses on business operations across crucial economic sectors.
Finance costs typically encompass various debt-related expenses. These include the servicing of loans, interest payments on lease agreements, and interest on commercial paper and other financial instruments that companies utilize to fund their growth and daily operations.
The Central Bank of Nigeria (CBN) recently implemented a slight moderation in its monetary policy, lowering its benchmark interest rate to 27 per cent from 27.50 per cent.
In recent years, the escalating cost of debt has emerged as a principal challenge for Nigerian businesses, largely influenced by the CBN's stringent monetary tightening measures designed to combat inflation and stabilize the nation's currency in the foreign exchange market.
While these policy actions aimed to achieve macroeconomic stability, they concurrently made borrowing considerably more expensive for companies, compelling many to allocate a larger portion of their revenue towards servicing their debts.
Industry observers note that the situation has been exacerbated by a decline in consumer purchasing power, which has limited companies' capacity to transfer these rising costs to their customers.
Consequently, businesses have faced a challenging operating environment characterized by increasing finance expenses, diminishing profit margins, and weaker earnings across numerous industries.
An in-depth review by THISDAY of 20 companies spanning sectors like oil and gas, telecommunications, fast-moving consumer goods (FMCG), cement production, power generation, and brewing indicated that a few prominent firms bore a substantial part of the overall finance burden.
Among the reviewed companies, MTN Nigeria Communications Plc recorded the highest finance cost in 2025.
The telecommunications giant reported finance expenses amounting to N524.91 billion, marking an increase of approximately 22 per cent from the N431.65 billion reported in 2024. This rise was primarily due to increased lease liabilities from extended tower rental agreements and higher costs associated with financing infrastructure.
Following closely was Oando Plc, which declared finance costs of N465.4 billion in 2025, indicating a substantial surge of 97.3 per cent compared to N235.84 billion in the previous year.
Within the cement industry, Dangote Cement Plc reported finance costs of N351.5 billion in 2025. Despite this significant figure, it represents a considerable reduction of nearly 50 per cent from the N700.3 billion declared in 2024, suggesting a possible decrease in debt or adjustments to their financing strategies.
Similarly, Seplat Energy Plc reported finance costs of N281.21 billion in 2025, an increase of about 103 per cent from N138.7 billion in 2024.
Across the corporate landscape, the growing expense of borrowing continues to negatively impact profitability and returns to shareholders.
Companies are finding themselves allocating a larger share of their operating income to debt servicing, thereby reducing the funds available for expansion initiatives, investments, and dividend distributions.
Data from the CBN's recent Money Market Indicators shows that the average maximum lending rate in Nigeria's banking sector was 29.32 per cent in December 2025, a slight decrease from 29.71 per cent in December 2024.
This moderation followed the CBN's Monetary Policy Committee's (MPC) decision to reduce the Monetary Policy Rate (MPR)—the benchmark interest rate guiding lending conditions—to 27 per cent in 2025.
The maximum lending rate reflects the average of the highest interest rates charged by commercial banks and generally indicates current monetary policy conditions.
In December 2024, when the MPC maintained the MPR at 27.50 per cent, the maximum lending rate stood at 29.71 per cent.
Earlier in 2024, the rate experienced a sharp increase as the CBN intensified efforts to combat inflation and currency instability.
For example, the CBN's money market indicators show that the average maximum lending rate was 27.07 per cent in January 2024, when the MPR was 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 persisted 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 consequently rose from 29.93 per cent to 30.21 per cent during the same period.
The significant rise in borrowing costs had previously sparked concerns among analysts regarding the availability of credit for businesses already facing economic reforms, such as the federal government's foreign exchange market unification and the removal of fuel subsidies.
Historically, lending rates in Nigeria have shown considerable fluctuation.
Available data indicates that the average maximum lending rate in the banking sector has been approximately 14.17 per cent between 1961 and 2024.
The rate reached an unprecedented peak of 37.80 per cent in September 1993 and 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, despite the MPR being set at 13.5 per cent at the time.
Despite the recent reduction in the benchmark rate, analysts caution that lending rates might remain high in the short term, influenced by inflation trends and banks' own funding costs.
Investment banker and stockbroker Tajudeen Olayinka commented on this trend, stating that commercial banks adjust their lending rates based on their internal funding expenses and prevailing market dynamics, rather than solely on the MPR.
He explained that the benchmark interest rate primarily serves as an indicator of the general direction of interest rates within the economy.
"Banks regularly assess their lending rates, taking into account their cost of funds and market interest rate movements," he stated.
"The composition of a bank's deposits, including inactive customer balances, determines its weighted average cost of funds, which is then used to establish its prime lending rates."
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