Marché Nouvelles

Kayode Tokede

Following spiralling inflation and other variables, Dangote Cement Plc and 10 other manufacturing companies listed on the Nigerian Exchange (NGX), spent an estimated N2.24 trillion on operating expenses in the first quarter (Q1) of 2025.

This represents a significant increase of 29.4 per cent from N1.73 trillion in the first quarter of 2024. The 11 companies’ massive OPEX is higher than the 24.23 per cent March 2025 inflation figure released by National Bureau of Statistics (NBS).

However, the companies were able to drive revenue in Q1 2025, a key factor that contributed to profit generation.

Cumulatively, their revenue stood at N3.23 trillion in in the quarter under review, representing an increase of 46 per cent from N2.22 trillion declared in Q1 2024. 

Aside from inflationary pressure, plummeting Naira at the foreign exchange market, other key factors such as high cost of power, transportation of goods & services, among others contributed to their whooping OPEX

Naira at the Nigerian Foreign Exchange Market (NFEM) depreciated to N 1,536.82 against the dollar as of March 2025, from N1,329.76 against the dollar March 2024.

The prolonged Russia-Ukraine war has induced strain in the global supply chain and has continued to the increase in the cost of raw materials for manufacturers as both countries rank among the top 10 producers of wheat.

Analysis of their Q1, 2025 result and accounts submitted to the NGX, showed that Dangote Cement, followed by BUA Foods Plc and Nigerian Breweries Plc recorded the highest of OPEX.

While Dangote Cement declared N612.75 billion OPEX in Q1 2025, about 4.04 per cent increase from N588.96 billion in Q1 2024, BUA Foods reported N303.55 billion OPEX in Q1 2025, up 18.6 per cent from N255.87 billion in Q1 2024.

Nigerian Breweries, on its part closed Q1 2025 with a OPEX of N298.5 billion, a growth of 48.4per cent from N201.11 billion in Q1 2024.

In a chat with THISDAY, analysts stated that the hike in inflation rate, among others, contributed to OPEX, which is not restricted to manufacturing companies only.

Sadly, they predicted further hike in OPEX in 2025, stressing that its impact may cut down on earnings and dividend payout to shareholders.

Speaking, the Vice President, Highcap Securities Limited, Mr. David Adnori said the hike in banks operating expenses is a reflection of global economic unrest, stressing that financial institutions operating in Nigeria and in Africa do not operate in isolation.

He expressed that the growth in operating expenses reported by listed companies would definitely have an impact on profit and dividend pay-out to shareholders.

He said, “The world is currently facing a high inflation rate and Nigeria, Africa at large are not exempted from this experience, with countries on the continent witnessing record high inflation rate. The surge in inflation rate is following the rally in crude oil prices, amidst the face-off between Russia/Ukraine, among other nations.

“Reacting to the surging inflation rate, regulators of several countries where Nigerian companies operate have also raised their interest rates to curb the rising cost of goods and services. However, this is yet to yield any significant positive as the inflation rate above 30 per cent. With cost impacted, Nigerian companies may suffer slow profitability this year and it might impact on dividend pay-out.”

On his part, the CEO, Centre for Promotion of Private Enterprise (CPPE), Dr Muda Yusuf stated that inflationary pressures remain a key concern in the Nigerian economy, both for businesses and the citizens.

He highlighted that implications of high inflation rate include escalation of production and operating costs for businesses, leading to erosion of profit margins, drop in sales, decline in turnover and weak manufacturing capacity utilisation, high food prices which impacts adversely on citizens welfare and aggravates poverty.

He further stated that weak purchasing power, which poses significant risk to business sustainability and price volatility, which undermines investors’ confidence are major implications of high inflation pressure.

He explained that the major drivers of inflation and cost in the economy include exchange rate depreciation, which has a significant impact on headline inflation, “especially the core sub index and liquidity challenges in the foreign exchange market impacting adversely on manufacturing output.”

He added, “High transportation costs affecting distribution costs across the country. This is also reflected in the huge differential between farm gate prices and market prices; monetization of fiscal deficit (CBN financing of deficit) is highly inflationary because of the liquidity injection effects on the economy. This becomes worrisome when statutory thresholds are exceeded and high transaction costs at the nation’s ports increases production and operating costs of businesses.”

According to aWorld Bank report, Nigeria’s inflation rate is projected to average 22.1 per cent in 2025 as the CBN’s tight monetary stance begins to anchor inflation expectations and restore confidence in macroeconomic management.

“The report further adds that Inflation has remained high and sticky but is expected to fall to an annual average of 22.1per cent in 2025, as a sustained tight stance firmly establishes monetary policy credibility and dampens inflationary expectations,” the statement read.

Nigeria’s inflation has been driven by the removal of fuel subsidies, exchange rate unification, which resulted in high logistics and energy costs, and food supply disruptions.

However, the report noted that recent monetary tightening by the CBN is beginning to slow inflation momentum.