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In this article, we will be taking a look at the most indebted firms in Nigeria and those susceptible to a higher interest rate environment that makes it difficult to meet obligations.
Firms prefer to raise money through debt rather than equity because it is cheaper and because it enjoys a tax shield that helps profitability. Secondly, taking on debt does not lead to dilution of control.
Some of the biggest companies in Nigeria are also the most indebted, and there is nothing wrong in having much debt in the capital structure.
However, too much debt especially in a high interest rate environment where an aggressive rate hike by the central bank who seeks to tame rising inflation makes refinancing more difficult amid rising borrowing costs and slower economic growth.
It is worse still if a firm has a very weak operating income which cannot absorb finance costs.
- Ardova Plc
Total debt of the company in the latest financial year : N46 billion
Ardova Plc is an indigenous petroleum marketing company with structured operations and strategic policies to continuously improve product delivery to its customers.
The downstream oil and gas giant uses more of external borrowing to finance its balance sheet, which exposes it to bankruptcy if it is unable to service interest payment on debts that are mounting.
For instance, debt to equity ratio or D/E ratio stood at 496.51 percent as at December 2022 from 304.90 percent the previous year. This means is that total long term liabilities are 4.96 times equity,
- International Breweries Plc
Total debt of the company in the latest financial year : N115.3 billion.
The brewer may have difficulty paying up its debt because of its weak profit position. Times coverage ratio of 0.20 is lower than the 1.50 internationally accepted benchmark.
- Nigerian Breweries Plc
Total debt of the company in the latest financial year : N122.25 billion.
The Company is engaged in brewing, marketing, and selling of lager, stout, non-alcoholic malt drinks and soft drinks. The Company’s brands include Star lager beer; Gulder lager beer; Maltina, which is a nourishing malt drink.
7. Notore Chemical Plc
Total debt of the company in the latest financial year : N140.1 billion.
With a debt to equity ratio of 233 and times coverage ratio of 0.30, Notore is really walking on rotten ice.
Notore Chemical Industries Plc is specialized in manufacturing, treating, processing, production and dealing in nitrogenous fertilizers and all substances suited to improving the fertility of soil and water.
- Nestle Nigeria Plc
Total debt of the company in the latest financial year (in millions): N155.3 billion.
Nestle Nigeria Plc is a Nigeria-based food manufacturing and marketing company. The Company is engaged in the manufacturing, marketing, and distribution of food products, including purified water throughout the country.
- BUA Foods Plc
Total debt of the company in the latest financial year : N195.429 billion.
BUA Foods PLC operates as a food and fast-moving consumer goods company. The Company processes, manufactures, and distributes food produce such as flour and pasta, sugar, refined oil, and rice. BUA Foods serves customers in Nigeria.
- BUA Cement Plc
Total debt of the company in the latest financial year : N239.38 billion.
BUA Cement Plc is a Nigeria-based cement manufacturing company. The Company is primarily engaged in manufacturing and sale of cement to the general public.
- Flour Mills of Nigeria Plc
Total debt of the company in the latest financial year: N303,71 billion.
Flour Mills of Nigeria Plc is engaged in flour milling; production of pasta, noodles, edible oil and refined sugar; production of livestock feeds; farming and other agro-allied activities; distribution and sale of fertilizer.
- MTN Nigeria Plc
Total debt of the company in the latest financial year : N689.67 billion.
MTN Nigeria Communications Plc is a Nigeria-based company engaged in the business of building and operating Global System for Mobiles (GSM) cellular network systems and other related services in Nigeria.
- Dangote Cement Plc
Total debt of the company in the latest financial year : N725.87 billion.
Dangote Cement Plc is a Nigeria-based cement company. The principal activity of the Company and its subsidiaries is to operate plants for the preparation, manufacture and distribution of cement and related products.