Against the backdrop of persistently high lending rates, major manufacturers have significantly reduced their reliance on bank credit. Financial statements for the first nine months of 2025 (9M’25) show that combined bank borrowings in the sector fell by 20.3%, dropping to N2.014 trillion from N2.526 trillion in the corresponding period of 2024.
Further findings by Financial Vanguard indicate that many firms have shifted their financing strategy toward equity issuance, corporate bonds, commercial papers, and retained earnings, resulting in a remarkable 52.8% decline in aggregate finance costs—from N1.4 trillion to N662 billion within one year.
Despite the funding squeeze, manufacturers recorded strong top-line growth, with total turnover rising by 37.9% to N10.1 trillion, compared to N7.3 trillion in 9M’24. The sector also staged a dramatic turnaround in profitability, posting N2.5 trillion in profit for 2025, a sharp reversal from the N116 billion loss recorded a year earlier. However, cost of sales surged 57.9% to N5.7 trillion, reflecting continued pressure from input inflation.
Breakdown of Borrowings
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BUA Foods reduced its loan book to N1.105 trillion (from N1.559 trillion).
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Nestlé Nigeria reported N521.01 billion, down from N653.70 billion.
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Nigerian Breweries recorded N162.17 billion, down from N204.17 billion.
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Unilever Nigeria cut its borrowings to N2.2 billion (from N2.8 billion).
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NASCON Allied dropped from N3.3 billion to N67 million — a 98% decline.
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Lafarge Africa reduced borrowings to N1.72 billion (from N2.214 billion).
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Fidson Pharmaceuticals recorded N12.27 billion, down from N8.979 billion.
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Vitafoam posted N13.99 billion (up from N7.8 billion).
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Okomu Oil recorded N5.57 billion (down from N7.1 billion).
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Presco Oil reported N159.8 billion, up from N46.5 billion.
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Cadbury posted N27.97 billion, down from N31.2 billion.
Major players—including Dangote Cement, Dangote Sugar, Guinness, International Breweries, and Champion Breweries—recorded no new borrowings, signaling a deliberate retreat from costlier commercial bank credit.
Sharp Decline in Finance Costs
The shift in financing structure led to a steep drop in finance costs across the sector:
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Nestlé: N55.2bn (down from N369.2bn)
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Nigerian Breweries: N39.2bn (down from N72.0bn)
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BUA Foods: N11.9bn (down from N21.7bn)
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Dangote Sugar: N95.6bn (down from N300.2bn)
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NASCON: N542m (down from N934m)
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International Breweries: N7.2bn (down from N29.15bn)
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Lafarge: N3.65bn (down from N5.396bn)
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Guinness: N109.7bn (down from N120.85bn)
What Experts Are Saying
David Adonri, Executive Vice Chairman, HighCap Securities:
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The decline shows companies are avoiding bank loans and relying on retained earnings and non-bank credit.
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Despite slight cuts in benchmark rates, lending rates remain high.
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Banks may experience reduced income as borrowers move away from expensive credit.
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Inflation-adjusted price increases helped protect profit margins.
Dr. Muda Yusuf, CEO, CPPE:
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High interest rates remain the primary cause of reduced borrowing.
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Firms are increasingly using commercial papers and equity-based funding.
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The trend reveals a growing disconnect between the banking system and the real sector.
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FX stability and macroeconomic improvements contributed to the profit rebound.
Tajudeen Olayinka, Banker and Chartered Stockbroker:
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The 20% decline in loans is not a threat but a sign of prudent financial management.
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Manufacturers are avoiding being locked into today’s high rates.
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Finance cost reductions reflect improved macroeconomic stability.
Clifford Egbomeade, Public Analyst:
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The borrowing decline is a rational reaction to the CBN’s tight monetary policy.
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Profits were boosted by deleveraging and lower FX losses rather than operational efficiency.
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Sustained improvements depend on stable FX and productivity gains.
Implications for Banks and the Economy
Analysts warn that prolonged deleveraging could reduce commercial banks’ loan growth and interest income. Many may shift focus toward government securities unless credit becomes more affordable.
The key policy challenge remains balancing credit accessibility with inflation control. Experts recommend targeted financing through development banks and credit-guarantee schemes.
Sector Outlook: Cautious Optimism
Though recovery remains fragile due to high inflation, energy costs, and infrastructure gaps, FX stability and lower finance costs have strengthened confidence in the manufacturing sector.
According to Yusuf:
“If policy consistency continues and credit channels improve, 2026 could consolidate the sector’s recovery.”