Nigeria companies have recorded strong profit margins because of a foreign exchange stability that significantly shrank exceptional losses and their ability to pass along higher prices to customers even amid rising cost of production.
Since inflation is still high and their foreign exchange volatility persists, investors are watching with keen interest how companies are able to keep margins at record levels.
For the first quarter, net profit margin for the NGXASI-30 index (the lists of the most liquid and capitalised firms) was at an estimated 23.51 percent, surpassing the corresponding (Q1 ’24) figure of 13.30 percent, according to MoneyCentral calculations.
The combined net income or profit after tax (PAT) of NGXASI 30 index stood at N2.86 trillion as at March 2025, which is 50 percent higher than 2024’s N1.91 trillion.
Despite the margin expansion, companies are beset by macroeconomic challenges such as inflationary pressures, elevated borrowing costs. The Energy and Industrial Goods sectors are reeling from additional pains such as elevated gas prices and the pass-through effect of a higher exchange rate that aggravates cost pressures.
Nigeria’s headline inflation rose to 24.23 per cent in March 2025, up from 23.18 per cent recorded in February, according to the latest data released by the National Bureau of Statistics.
“Inflation has remained high and sticky, and the Central Bank of Nigeria (CBN) has kept monetary policy appropriately tight in response,” the World Bank said in a biannual development report on Nigeria, Monday.
“Entrenched inflationary expectations after a prolonged period of high inflation and inflation inertia are apparent.”
Further analysis shows the consumer goods firms are the greatest beneficiary of stability in the foreign exchange market as three entities returned to the path of profitability contributing to the index’s strong earnings.
The average net profit margin for consumer goods rose to 11.20 percent from -38.09 percent the previous year.
The dominant cement markers (Dangote Cement Plc, BUA Cement, and Lafarge Africa Plc) have a combined average net profit margin of 22.83 percent, which is higher than 2024’s 9.56 percent, according to MoneyCentral calculations.
Their combined net income spiked by 149.75 percent to N339.01 billion in 2025 from N135.83 billion the previous year.
Waning foreign exchange gains as well as rising operating costs undermined banks’ net profit margin which reduced to 26.74 percent in March 2025 from 27.75 percent the previous year.
Of course, the cost to income ratios have been rising while the net interest margin, which is the net interest income a lender earns from credit products like loans and mortgages, minus the interest it pays to holders of savings accounts and certificates of deposit (CDs), has been receding.
Small wonder the combined profit of listed lenders on the index grew at a mere 2.30 percent to N1.50 trillion as at March 2025.
The major players in the Agric sector Okomu Oil Plc and Presco Oil Plc saw their average profit margins fall to 44.06 percent in March 2025 from 45.67 percent the previous year as they capitulated to inflationary environment and currency depreciation.
Analysts at Meristem Securities anticipate increased topline (sales) for domestic players due to robust demand, coupled with increased volumes and elevated domestic price.
“We maintain a modest outlook for the agricultural sector in 2025,” said analysts at Meristem Securities.
“This is hinged on ongoing efforts from the fiscal authorities to attract viable investments while also tackling persistent challenges related to food security and technological advancements in agricultural production. However, inflationary pressures and other structural issues within the sector pose a downside to our outlook,” said analysts at Meristem Securities.
The largest telco firms MTN Nigeria Plc and Airtel Africa Plc took advantage of an improving macroeconomic conditions as they deployed cost optimization that helped lift industry margins to 20.86 percent in March 2025 from -9.13 percent the previous year as earnings were also bolstered by continued strength in the demand for data services.
The average combined net profit margin for Geregu Power Plc and Transcorp Power Plc increased to 31.84 percent in 2025 from 29.17 percent as at March 2024 as earnings growth were driven by driven by rising electricity demand amid robust population growth and accelerating urbanisation.
Analysts are optimistic about future margin growth supported by infrastructure expansion and government policies supporting private sector investment.
The power generation sector is set for notable improvements in both capacity and efficiency, driven by infrastructure expansion and enhanced operational reliability, which are anticipated to reduce costs and bolster margins, according to analysts at Meristem Securities.
“Government policies supporting private sector investment, along with efforts to increase generation capacity and foster competitive pricing, are likely to further strengthen the sector, enhancing operational efficiency and profitability,” summed analysts at Meristem Securities.
