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Brace Up, The Mother Of All Interest Rate Hikes Is Coming

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Nigerian companies are on track to incur higher finance cost in the second half of the year as rising inflation rate pile pressure on the CBN to raise interest rates.

Latest data from the National Bureau of Statistics reveal Nigeria’s inflation rate rose by 20.52% in the month of August 2022, the highest pace since September 2005.

This is likely to trigger another rate rise from Nigeria’s central bank which will make it the third time this year. The benchmark interest rate was first raised in May to 13% from 11.5% and then again to 14% in July after the National Bureau of Statistics reported a five-year high inflation of 18.60% in June and moved up to 19.64%, the highest since 2005.

Exchange rate between naira and dollar depreciates to N708/$1 at the black market on 19th September 2022

When interest rates are raised by apex banks, it immediately elevates short-term borrowing costs for financial institutions with ripple effects on virtually all other borrowing costs for companies and consumers. For banks, it increases interest income, while for corporates it results in higher interest expenses.

According to data from 30 of the largest companies on the Nigerian Exchange, net finance cost has risen from N148 billion in the first half of 2021 to N203 billion in the same period this year. Total debts have risen to N2.8 trillion in the first half of 2022 compared to about N2 trillion in the same period last year. We expect finance costs to rise further in the second half of the year due to a combination of more loans and higher interest charges.

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With the CBN likely to raise rates when the next monetary policy committee meeting takes place later this month, we believe the cost of borrowing across the country will rise in tandem. The apex bank gave the signal to this when it increased interest rates in regulatory forbearance for its intervention loans from 5% to 9% last month.

Nigeria’s central bank also seems to have chosen price stability over growth, thus the urgent need to raise rates and this can be seen in the personal statements of members of the MPC at the last meeting in August. Here is what the CBN said last August:

“Aside from narrowing the negative real interest rate gap, Members were also of the view that tightening would signal a strong determination of the Bank to aggressively address its price stability mandate and portray the MPC’s sensitivity to the impact of inflation on vulnerable households and the need to improve their disposable income”

CBN Governor, Godwin Emefiele actually went for a more aggressive rate hike, proposing 14.5%. This is what he said, “I am convinced that policy tightening, to a significant degree is crucial at this time. I believe that given the over 84 and 200 basis points increases in headline and food inflation, respectively, aggressive tightening is necessary to dampen pervasive inflation, contain expectations, and provide a forward guidance.”

The impact will be huge across industries, especially for companies that are highly indebted or those that are planning to raise money from the debt markets.

The latest data from the apex bank reveal Nigeria’s prime and maximum lending rate was 12.1% and 27.6% respectively as of July this year. These rates are likely going to rise as we approach the end of the year and companies who have floating exchange rates will feel the pinch. We also envisage some of the country’s largest debtors who tapped the bond market at below MPR rates will continue to service the loans at the same rate however, rates for newer borrowings will likely increase.

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in addition to a potential for rising rates on local denominated loans, we also envisage an uptick in lending rates for foreign borrowings. Sentiments across the world suggest monetary authorities globally are primed to raise their rates when they meet later this month. These sentiments have sent global stock markets tumbling.

A rise in rates for dollar borrowing will also affect fresh debt issuance for local companies. Existing foreign currency loans are also likely to take a hit.

Investors in some of the highly leveraged companies on the Nigerian Exchange will need to brace up for a possibility of lower dividend next year. The stock market is also likely to take a hit as investors cycle fund out of potentially low yielding investments into interest bearing fixed income securities.

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Uba Sani: Least Paid Worker In Kaduna Earns N72,000

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Uba Sani, governor of Kaduna, says no worker in the state earns less than N70,000 as salary in compliance with the new minimum wage.

Sani spoke on Thursday at Murtala Square in Kaduna on occasion the Workers’ Day celebration.

The governor said the least paid worker in the state earns N72,000, noting that he believes in the dignity of labour, adding that the issue of incremental adjustment of salaries would be addressed soon.

“I have been involved in the struggle for labour rights, workers’ rights. That is my antecedent. Because of my background, I sat down with the leadership of the Nigerian Labour Congress (NLC),” Sani said.

“I made it clear to them that though we have met the minimum wage requirement but there is something called incremental adjustment which is discretionary.

“Because of my relationship with both NLC and TUC, I asked them that we should sit down and come up with a formular that will make every worker in Kaduna state happy, irrespective of his or her status and they came up with three different options.

“Today, I want to reaffirm to all of you here that by the grace of God, we will look at the incremental adjustment and ensure that even senior civil servants will benefit because we have to make our workers happy.’’

The governor added that his administration also prioritises improving the living conditions of pensioners.

He said the state government has released N3.8 billion to settle outstanding gratuities, death benefits, and accrued rights under the contributory pension scheme in April.

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“Since the inception of our administration, we have cumulatively paid the sum of N10.4 billion in gratuity, death benefits, and accrued rights in the Contributory Pension Scheme,” Sani said.

The governor said the payment of such a huge sum to pensioners is “unprecedented.”

Commenting on the ongoing industrial action by the Kaduna State University branch of the Academic Staff Union of Universities (ASUU), Sani said his administration has done everything to reposition the school.

According to him, more than 60 percent of the courses were not accredited when he assumed office, but his administration spent over N300 million to secure National Universities Commission (NUC) accreditation.

The governor said the striking lecturers’ demands had accumulated over 17 years, with about three of his predecessors unable to settle the liabilities, which now total between N5 billion and N6 billion.

“In spite of this, the lecturers want us to settle these liabilities now, and I said no. I said that we have to sit down and have a dialogue. I then asked them, where were their voices in the last 17 years?” he said.

He promised that the problem would be addressed owing to the importance of education, which he described as the “greatest leveller”.

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PETROAN Asks FG To Prioritise Welfare Of Oil, Gas Workers

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The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has asked the government to prioritise the welfare of oil workers, given the hazardous nature of their work.

In a statement on Thursday, Billy Gillis-Harry, PETROAN’s president, hailed oil and gas workers across the country on Workers’ Day.

According to Joseph Obele, PETROAN’s spokesperson, Gillis-Harry, while addressing journalists in Abuja, appealed to the government and stakeholders in the industry to improve welfare packages and expand health insurance for oil workers.

“Studies have shown that workers in areas where gas flaring is prevalent are at high risk of several health challenges, which can affect them physically, mentally and even increase cancer risks,” Gillis-Harry was quoted as saying.

The association said gas flaring remains a serious problem in Nigeria’s energy industry, exposing workers and nearby communities to harmful health and environmental effects.

The group said the impact of gas flaring highlights the urgent need for better health protection and general welfare for those working in the sector.

According to the statement, Gillis-Harry urged regulatory bodies to strictly enforce existing laws aimed at stopping gas flaring in the country.

“It’s imperative that we prioritise the health and well-being of our workers and protect the environment from the harmful effects of gas flaring,” the president said.

The spokesperson said PETROAN believes ending gas flaring would reduce its harmful impact on workers and host communities and help build a more responsible oil and gas industry.

Obele said PETROAN commended governors who have started paying the new minimum wage, especially those paying above the set rate.

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“Billy Gillis-Harry called on governors who are yet to comply to do so in the shortest possible time, emphasising the need for workers to receive fair compensation for their labour,” he said.

He said the association also reaffirmed its commitment to collaborating with stakeholders to support oil and gas workers and ensure safe and healthy working environments.

Obele said PETROAN is of the view that better welfare and an end to gas flaring would boost productivity, reduce accidents, and raise performance across the industry.

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MTN Nigeria posts N1trn revenue surge

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MTN Nigeria Communications Plc generated N1.0 trillion in service revenue in the first quarter of 2025.

This marks a 40.5 per cent increase from the N752.99 billion earned in Q1 2024.

The company confirmed this in a corporate filing with the Nigerian Exchange Ltd. on Tuesday.

Profit after tax dropped by 134 per cent, falling to N133.7 billion from N392.7 billion in the same period of 2024.

Its total subscriber base grew by 8.2 per cent to 84.1 million, with 3.2 million new additions in Q1 2025.

Active data users rose by 13 per cent to 50.3 million, following the addition of 2.6 million users.

EBITDA climbed 65.9 per cent to N492.7 billion, while EBITDA margin improved by 7.2 percentage points to 46.6 per cent.

The company recorded free cash flow of N209.9 billion and earnings per share stood at N6.38.

MTN Nigeria CEO, Karl Toriola, expressed satisfaction with the Q1 2025 results, citing strong strategic execution and resilient service demand.

He said momentum from Q4 2024 had helped put the firm on track to restore profitability and achieve a positive net asset position.

He added that regulatory approval for price adjustments was essential to sustain investment and maintain service quality.

This approval enabled N202.4 billion in capital expenditure, up 159 per cent, aimed at expanding capacity and enhancing user experience.

Toriola said the 40.5 per cent growth in service revenue underscored strong demand and commercial discipline.

He noted that Q1 results do not yet reflect the full impact of price changes made late in the quarter. (NAN)

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