Key Points

• Manufacturers slashed combined bank borrowings by 20.3 percent in 9M’25, shifting funding to equity and retained earnings.
• The strategic funding shift reduced manufacturers’ aggregate finance cost by 52.8 percent, leading to a N2.5 trillion profit.
• Experts blame the decline on Nigeria’s persistent high interest rates, which make bank credit too expensive for firms.

Leading Nigerian manufacturers significantly scaled down their bank borrowings due to the country’s high interest rate regime.

Financial results from major manufacturers for the first nine months of the year, 9M’25, show their combined bank borrowings fell by 20.3 percent to N2.014 trillion.

This marks a sharp drop from the N2.526 trillion recorded in the same period of 2024.

The firms have shifted their funding sources, turning instead to equities, corporate bonds, and retained earnings.

This strategic move drastically reduced their aggregate finance cost, which tumbled by 52.8 percent to N662 billion from N1.4 trillion a year earlier.

This funding shift also coincided with a strong performance in the manufacturing sector. The combined turnover of the firms jumped 37.9 percent to N10.1 trillion in 9M’25 from N7.3 trillion in the 2024 period.

Consequently, the profit and loss account position reversed drastically, with the firms recording N2.5 trillion profit in 2025, up from a N116 billion loss in 2024.

However, the cost of sales also surged by 57.9 percent to N5.7 trillion, reflecting persistent input inflation.

Borrowing Breakdown

B U A Foods led the reduction, with its loan book dropping to N1.105 trillion in 9M’25 from N1.559 trillion.

Nestlé Nigeria followed, recording N521.01 billion, a 20.3 percent decrease from N653.70 billion. Nigerian Breweries booked N162.170 billion in loans, a 20.6 percent decrease.

Other firms also posted declines. For instance, Unilever Nigeria recorded a 22.8 percent drop, and N A S C O N Allied posted a 98 percent drop.

Furthermore, major manufacturers such as Dangote Cement, Dangote Sugar, International Breweries, Guinness, and Champion Breweries reported no new borrowings during the period, signaling a strategic retreat from expensive bank credit.

The shift registered a huge positive impact on finance costs. Nestlé saw its financing cost fall to N55.2 billion from N369.2 billion. Similarly, Dangote Sugar’s finance cost dropped to N95.6 billion from N300.2 billion.

Experts Cite High Interest Rates

Industry experts agree the high interest rate regime has suppressed manufacturers’ credit appetite.

David Adonri, Executive Vice Chairman of HighCap Securities Limited, told reporters the pattern indicates a shift away from banks as core financiers.

“The reduction in bank borrowings means companies exploited other non bank credit sources or used retained earnings,” he said.

Adonri warned that as borrowers shun bank credit, banks’ income may fall below investors’ expectations. He added that while cost of sales rose, inflation induced price adjustments helped firms recover margins.

Dr Muda Yusuf, Chief Executive Officer of the Center for Promotion of Private Enterprise, attributed the fall in borrowing to the persistent high cost of funds.

“Interest rates have remained elevated, and in an economy with weak purchasing power, businesses are cautious about incurring huge financing costs,” Yusuf said.

He noted that many firms have turned to commercial papers and equity funding.

Yusuf warned that this trend suggests the banking system is gradually delinking from the real sector, undermining the bank’s fundamental role of financial intermediation.

He added that profit recovery reflects macroeconomic stabilization and improved foreign exchange liquidity.

Not a Threat, Say Analysts

Tajudeen Olayinka, a banker and chartered stockbroker, views the decline in bank credit as an act of financial prudence, not a threat.

“A 20.3 per cent drop in borrowings by manufacturing firms does not threaten the economy. It simply means they accessed other funding sources cheaper or more stable than bank loans,” he explained.

Olayinka credited the 52.8 percent drop in finance costs to better financial management and the naira’s appreciation, noting that recent reforms are “beginning to pay off.”

Public analyst Clifford Egbomeade called the 20 percent fall in borrowings a “defensive, rational response” to the Central Bank of Nigeria’s tight monetary stance.

He said the policy pushed effective lending rates above 30 percent, making working capital borrowing prohibitive.

Egbomeade noted that the rebound in profitability reflects price pass through, calmer foreign exchange markets, and financial restructuring.

He urged policymakers to now focus on lowering real production costs like energy, logistics, and taxes to unlock investment capacity.

Analysts agree the deleveraging trend could squeeze banks’ interest income, but they describe the manufacturing rebound as fragile.

However, they believe that policy consistency and the revival of credit channels could consolidate this recovery in 2026.