Most Nigerian firms presently servicing long term facilities are more vulnerable to interest rates because they have higher debt servicing costs.
Caverton Offshore Support Plc has interest coverage ratio of 1.35; Total Nigeria Plc, 1.01, Livestock Feeds Plc, 1.05, and Dangote Sugar, 0.09, according to permutations.
The Interest Coverage Ratio (ICR), also known as the Times Interest Earned (TIE) ratio, is a financial metric that assesses a company’s ability to pay its interest expenses on outstanding debt. It’s calculated by dividing the company’s earnings before interest and taxes (EBIT) by its interest expense.
Even as interest rates are high, the interest coverage ratio of most companies is above the threshold as they are able to sustain strong earnings amid a challenging environment.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria retained the Monetary Policy Rate at 27.50 per cent, marking its second consecutive hold in 2025, meaning firms often borrow at above 30% per annum.
Higher interest rates are deleterious to firms or businesses because it makes borrowing more expensive and magnifies the finance costs, which in turn squeezes cash flow and profit margins.
The country’s headline inflation rate dropped to 23.71 per cent in April 2025 from 24.23 per cent in March, according to data gathered by the National Bureau of Statistics (NBS).
“The MPC noted the relative improvements in some key macroeconomic indicators which are expected to support the overall moderation in prices in the near to medium term,’ said Olayemi Cardoso, the Central Bank of Nigeria (CBN) Governor.
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