Against the backdrop of a high-interest-rate regime, leading manufacturers have scaled down bank borrowings significantly.

Details of the manufacturers? financial results in the first nine months of the year (9M?25) showed that their combined bank borrowings declined by 20.3% to N2.014 trillion from N2.526 trillion they recorded in the same period of 2024, 9M?24.

Further findings by Financial Vanguard indicated that the firms have shifted their funding sources to equities, corporate bonds and retained earnings.

With this shift, their financial profile has also shifted with aggregate finance cost tumbling drastically by 52.8 per cent to N662 billion from N1.4 trillion a year earlier.

Also, the combined turnover of the firms jumped 37.9 per cent to N10.1trillion in 9M?25 from N7.3 trillion in the corresponding period of 2024.

Similarly, the profit and loss account position reversed drastically from loss position. The firms recorded N2.5 trillion profit in 2025, up from a N116 billion loss in 2024.

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

Breakdown of borrowings

BUA Foods led the pack with its loan book dropping to N1.105 trillion in 9M?25 against N1.559 trillion in 9M?24. It is followed by Nestl? Nigeria recording N521.01 billion from N653.70 billion, indicating a decrease of 20.3%. Nigerian Breweries booked N162.170 billion in loan, representing a decrease by 20.6% against N204.170 billion in 9M?24.

Other figures showed that Unilever Nigeria recorded N2.2 billion, down 22.8% from N2.8 billion, while NASCON Allied posted N67 million against N 3.3billion, representing a 98% drop.

Lafarge Africa?s borrowing dropped by 22.4% to N1.72 billion from N2.214 billion; Fidson Pharmaceuticals posted N12.27 billion against N8.979 billion representing a decrease by 36.7%; Vitafoam recorded N13.99 billion against N7.8 billion; Okomu Oil recorded N5.57 billion down from N7.1billion; Presco Oil posted N159.8 billion against N46.5 billion and Cadbury posted N27.97 billion against N31.2billion in 9M?24.

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

Impact on finance cost

The strategic financing shift has registered a huge positive impact on the finances of the affected manufacturers.

Nestl? recorded a N55.2 billion financing cost in 9M?25, down from N369.2 billion in 2024 ; Nigerian Breweries posted N39.2 billion, down from N72.0 billion; BUA Foods recorded N11.9 billion, down from N21.7 billion; Dangote Sugar N95.6 billion, down from N 300.2billion; NASCON recorded N542 million, down from N934 million; International Breweries posted N7.2 billion, down from N29.150 billion; Lafarge N3.65 billion, down from N5.396 billion; and Guinness N109.7 billion, down from N120.851 billion.

Finance experts explain

Industry experts say the declines in borrowings and financing cost in the manufacturing sector underscored how the high-interest-rate regime has suppressed credit appetite.

They also said many companies were postponing expansion plans or turning to cheaper funding sources, such as commercial papers, Rights Issues, or retained earnings to manage working capital.

?Borrowers shun bank credit; banks? income may fall??Adonri

Commenting on the development, David Adonri, Executive Vice Chairman of HighCap Securities Limited, told Financial Vanguard that the pattern pointed to a shift away from banks as the core financiers of working-capital needs.

?Banks provide working-capital finance. The reduction in bank borrowings means companies exploited other non-bank credit sources or used retained earnings.

?Although the benchmark rate has declined slightly, it hasn?t brought down lending rates materially.

?As borrowers shun bank credit and risk-free yields reduce, banks? income may fall below investors? expectations,? he said.

Adonri added that reduced borrowing automatically cuts finance cost, and that although cost of sales rose, inflation-induced price adjustments helped firms recover margins.

He noted: ?The economy is gradually adjusting to new price levels, and the productive sector is regaining leadership. That?s a positive development.?

?High cost of credit pushing firms to alternatives? ? Muda Yusuf

Dr. Muda Yusuf, Chief Executive Officer of the Centre for Promotion of Private Enterprise (CPPE), in his observation, said the continued high lending rates explained the fall in borrowing.

?The reduction in borrowing by manufacturing companies-and possibly others-can largely be attributed to the 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.

?Many firms have turned to commercial papers and equity funding, given the tight credit conditions.

?This trend also suggests that the banking system is gradually delinking from the real sector. That is worrisome because one of the banks? fundamental roles is financial intermediation, mobilising surplus funds to deficit areas.

?Persistent high interest rates undermine that function and limit banks? ability to support production,? he warned.

Yusuf urged policymakers to create an environment that reconnects banks with industry.

He added: Strengthening that link will enable banks to play a more substantial role in driving economic development.?

On the rebound in profitability, Yusuf credited macroeconomic stabilisation and improved FX liquidity.

?Many firms suffered in 2024 due to foreign-exchange shocks, but the environment has improved considerably. Profit recovery in 2025 reflects economic stabilisation and better investor confidence,? he noted.

However, he cautioned that headline figures were nominal.

?When adjusted for inflation, growth may not be as high as it seems but it still signals recovery,? he said.

20% fall in loans not a threat, shows financial prudence ?Olayinka

Reacting to the performance of the companies, Tajudeen Olayinka, banker and chartered stockbroker, said the decline in bank credit was not alarming.

?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.

?It may also indicate expectations that future interest rates will fall, so locking into today?s high rates would be imprudent,? he explained.

Olayinka linked the 52.8 per cent drop in finance costs to better financial management and the naira?s appreciation.

?Macroeconomic stability is clearly impacting positively on manufacturing. The improvement isn?t limited to manufacturing, it cuts across sectors,? he said.

He added that recent reforms under the Tinubu administration were ?inevitable and beginning to pay off.?

He said?. ?We haven?t reached our destination, but these are signs of stability. The economy is moving away from a painful inflationary phase toward macro stability.?

A rational, defensive response to tight policy ?Egbomeade:

In his comment, public analyst and communications expert, Clifford Egbomeade, described the 20 per cent fall in borrowings as a ?defensive, rational response? to the CBN?s tight monetary stance.

He said: ?The MPR stayed at 27.5 per cent through mid-2025, pushing effective lending rates above 30 per cent. In that environment, working-capital borrowing became prohibitive. Firms repaid or shifted funding to equity and commercial papers to avoid crippling interest charges.?

He noted that the fall in finance cost, while cost of sales rose, showed a balance-sheet effect rather than operational efficiency.

?Deleveraging and lower FX losses boosted profits, even as input inflation persisted. But that?s a one-off benefit. Sustaining margins will require continued FX stability and productivity gains,? he added.

On the sector?s recovery, Egbomeade said: ?A 38 per cent rise in turnover and a swing to N2.5 trillion profit show recovery from the 2023-24 shocks. But much of the rebound reflects price pass-through, calmer FX markets, and financial restructuring, not necessarily real investment growth.?

He urged policymakers to pivot from stabilisation to growth measures.

?Profits are back and balance sheets healthier, but now policy must focus on lowering real production costs energy, logistics, taxes and unlocking investment capacity,? he said.

Implications for banks, policy

Analysts agree that the deleveraging trend could squeeze banks? interest income, even as it improves corporate balance sheets.

With lending rates decoupled from policy cuts, the intermediation gap between the financial system and the real economy may widen.

?If manufacturers continue to fund through non-bank sources, banks will face subdued loan growth and may rely more on government securities,? Adonri warned.

The broader policy challenge, according to experts, is how to make credit affordable without fuelling inflation.

Targeted term finance through the Bank of Industry, development banks, or credit guarantees could help bridge the gap.

Sector outlook: Still fragile but improving

Despite the cautious optimism, experts describe the manufacturing rebound as fragile, as inflation, energy costs, and infrastructure bottlenecks continue to erode competitiveness.

Still, the combination of FX stability, lower finance costs, and modest monetary easing has restored a measure of confidence.

?The fundamentals are improving. If policy consistency continues and credit channels are revived, 2026 could consolidate this recovery,? said Muda Yusuf. (Vanguard)

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