At the backdrop of rising interest rates and foreign exchange scarcity, leading consumer goods manufacturing companies have come under severe funding pressure.
Financial Vanguard findings from the financial statements of the companies show that they have resorted to very expensive bank borrowings to sustain their businesses, increasing their exposure to the banks to N1.834 trillion in the first half of the year 2023, H1’23, a 24.5% increase against N1.473 trillion in the corresponding period of 2022, H1’22.
Data obtained from 11 leading companies listed on the Nigerian Exchange Limited, NGX, revealed that the finance cost from the borrowing rose astronomically by 411.2% to N330.972 billion in H1’23 from N64.745billion in H1’22.
The rising finance cost is majorly driven by the steady increases in Monetary Policy Rate, MPR, by the Central Bank of Nigeria, CBN, which hit 18.75% as at last month.
The MPR is the benchmark for determining the interest rate charged by banks.
The 11 leading companies are: Nestle Nigeria Plc, Unilever Nigeria Plc, Cadbury Nigeria Plc, Nigerian Breweries Plc, Dangote Sugar Refinery Plc, NASCON Allied Industries Plc.
Others include: Guinness Nigeria Plc, MCNICHOLS Consolidated Plc, BUA Foods, P Z Cussons Nigeria Plc, and International Breweries Plc.
Analysts and investment experts have decried the high cost of borrowing from the banks, saying that capital market equity remains the best financing option for the manufacturers for long term to meet operational needs.
They also advised manufacturing companies to consider Commercial Papers (CPs) for short term in order to reduce finance cost and avoid banks’ stringent conditions.
