MTN, Airtel, Brewers, Nestle, Dangote Cement, Notore, Make List of Most Indebted Firms

The list of the most indebted firms in Nigeria in 2023. Interest rates have been rising as the central bank is not ready to change its tightening stance as it seeks to curb red-hot inflation and spur foreign investment.

Of course, this aggressive monetary policy results in rising borrowing costs that balloon debt in the books of corporations, and still, firms with weak earnings or deteriorating cash flow may find it difficult to meet their obligations, which is a recipe for bankruptcy.

Many fast-growing firms prefer to use debt to fund their expansion because it is cheaper than equity. Debt enjoys a tax shield.

A couple of big companies took advantage of a low-interest rates during the COVID-19 crisis as they taped the debt market to refinance existing obligations and finance their working capital requirement, but the new high-yield environment combined with foreign exchange revaluation loss has left a big hole in the balance sheet of some firms.

Nigeria’s central bank raised its benchmark lending rate to 22.75% from 18.75 percent.

The Nigeria 10-year government bond has a 19.435 percent yield, according to World Government Bonds.

8-Airtel Africa Plc

Total Debt: N1,977bn

Airtel Africa Plc is one of the 10 most indebted companies in Nigeria. It is a telecommunications firm whose subsidiaries incurred huge obligations due to the Naira devaluation.

7-MTN Nigeria Plc

Total Debt: N1,177bn

MTN Nigeria is another telecom firm that has landed on our list of the most indebted firms in Nigeria. It has been issuing commercial papers to fund expansion plans. In December 2023, MTN Nigeria posted a record loss after tax on the back of foreign exchange revaluation losses.

6-Dangote Cement Plc

Total Debt: N1,012 bn

Dangote Cement, the most capitalised firm and largest producer of building materials in Africa’s most populous nation, is sitting on a debt pile. However, it has the financial strength to pay interest on the debts and there is no threat to going concerns.

5-Flour Mills of Nigeria Plc

-Total Debt: N484.21bn

Flour Mills of Nigeria is one of the largest consumer goods firms in Nigeria, but it has been funding its balance sheet with more debt than equity. Its obligations are as follows: Real Sector Support Facilities, N134.67 billion; other loans, N141.22 billion, and commercial papers and bonds, N167.82 billion.

4-Nestle Nigeria Plc

Total Debt: 402.31 bn

Nestle Nigeria is beleaguered by foreign exchange losses that tipped it into technical insolvency as total liabilities exceeded total assets. The company’s financial obligations were magnified by an increase in intercompany loans to $402.52 million in FY-23 from $318.52 million in FY-22 as well as the increase in import trade obligations.

3-International Breweries Plc

Total debt: N376.09 bn

International Breweries Plc is not impervious to the macroeconomic headwinds as it has been reeling from a huge debt load pre-COVID-19 even as it had raised capital through rights issues.

2- Nigerian Breweries Plc

Total Debt: N338.60bn

Nigerian Breweries Plc is another consumer goods firm on our list of most indebted firms in 2023. It struggles with short-term liquidity issues that make it difficult to meet short-term obligations.

1- Notore Chemical Industries Plc

Total Debt: N241.37bn

The principal activities of the Company are to manufacture, treat, process, produce, supply and deal in nitrogenous fertilizer and all substances suited to improving the fertility of soil and water.

It is a few steps away from technical insolvency as it carries N165.12 billion in accumulated losses in its books. There is also higher finance costs.

Culled from MoneyCentral