Corporate Finance: Capex Spending Flatlines as Top Firms Exercise Caution on Debt Financing

The largest Nigerian companies are focusing on current operations, rather than investing more in future growth in form of Capex Spending as higher borrowing costs mean firms are more cautious on capital investments.

“A low capex spend may reflect different factors, amongst which is the relatively low appetite of companies to fund CAPEX with debt capital at the relatively high level of interest rate,” said Abiola Rasaq, Economist and former Head of Investor Relations and Portfolio Investments for United Bank for Africa (UBA).

“Indeed, most CAPEX projects may not meet companies’ internal rate of return (IRR) or hurdle rate if funded at currently high cost of debt. Hence, firms may be cautious on CAPEX especially as they preserve internally generated liquidity for increased need for working capital. As the interest rate environment eases, new CAPEX projects can become more bankable and corporates may renew their appetite for CAPEX,” said Rasaq.

Capital expenditure (Capex) for our sample of 30 companies came in at a median average of 7.35 percent of sales in the first nine months of 2025, basically flat compared to 7.31 percent as at September 2024, according to MoneyCentral calculations; however, there is significant variance by industry.

For instance, capital intensive sectors such as building materials, oil and gas, telecommunications, and consumer goods recorded more capital expenditure due to the capital intensiveness of their business.

Capex to Sales is a financial ratio that compares a company’s capital expenditures to its sales revenue. The Capex to Sales ratio is significant because it provides a snapshot of how much a company is investing in its future growth relative to its current revenue generation.

A high Capex to Sales ratio in these sectors may indicate that a company is investing heavily in new technologies, infrastructure, or capacity expansion, which could lead to higher future revenues. Conversely, a low ratio might suggest that a company is not investing enough in its long-term assets, potentially risking future growth and competitiveness.

Of course, consumer spending and capital investment are the major drivers of economic growth, because if consumers buy more homes, revenue increases for the construction market and contractors.

The same can be said for manufacturers and telecoms as higher demands for goods spurs capital investments, which also results in higher employment.

The average CapEx to sales ratio for the largest consumer goods firms stood at 6.54 percent in September 2025 up from 4.77 percent as at September 2024.

Champions Breweries, International Breweries, Guinness Nigeria, and Nestle Nigeria recorded a ratio of 22.23 percent, 18.20 percent, 6.55 percent, and 7.86 percent that beat the industry average.

Oil and gas firms recorded CapEx to sales ratio of 6.18 percent as at September 2025, from 6.14 percent the previous year.

Seplat Energy and Aradel Plc both recorded ratios of 21.63 percent and 7.88 percent, which are higher than the industry average.

Seplat’s cash capital expenditure stood at $180.0 million in the first nine months of 2025, from $102.4 million the previous year. It narrowed its Capex guidance to $270-290 million (previously $260-320 million).

The average CapEx to sales ratio of Industrial Goods firms stood at 13.68 percent as at September 2025, down from 14.47 percent as at September 2024.

The average CapEx to sales ratio of the telecoms industry increased to 12.27 percent in the period under review from 12.10 percent the previous year.

MTN Nigeria recorded a ratio of 14.45 percent that is higher than the industry average.

The telecoms giant’s Capex, excluding leases, increased by 248.0 percent to N757.4 billion as investments were directed toward capacity expansion to ease congestion, deployment of additional sites to extend coverage, rollout of its fibre-to-the-home network and development of a new data centre.

It is important to note that the 30 non-financial firms collectively spent N2.35 trillion on the acquisition of property, plant equipment (PPE) as at September 2025, according to data gathered by MoneyCentral.

There is light at the end of the tunnel as a gradual economic recovery spurred by the transformative policies of the current government which causes short term pains underpins optimism about increased capital expenditure spending by companies who operate in a challenging environment.

According to the National Bureau of Statistics (NBS), in Q2-25, the Nigerian economy grew by 4.23 percent YoY in real terms. This marks an improvement from the 3.48 percent YoY growth recorded in Q2-24, and the 3.13 percent YoY growth observed in Q1-25.

Nigeria’s inflation continued its deceleration, moderating to 16.1 percent year-on-year (YoY) in October compared to 18.0 percent in the prior month, according to the latest CPI data released by NBS.

The yield on Nigeria 10-year bond yield held steady at 15.58 percent on November 13, 2025. Over the past month, the yield has fallen by 0.13 points and is 5.24 points lower than a year ago, according to over-the-counter interbank yield quotes for this government bond maturity, according to data from Trading Economics.

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