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Nigerian companies have never had so much debt in the books as they have been hit by high interest rates brought on by an aggressive tightening by the central bank who seeks to tame stubborn inflation.
Chief executive officers are scratching their heads because the proportion of debt in the capital structure is a recipe for bankruptcy since a deteriorating economy which undermines consumer spending and crimps demand squeezes cash flows and limits firms ability to meet their financial obligations.
Of course, market friendly reforms by the current administration such as the unification of exchange rate and the removal of subsidies on fuel combined with the Russia and Ukraine war has been hurting households and companies.
The average debt to equity ratio of non-financial firms rose to 159.89 percent in September 2023 from 105.50 percent as at September 2022, according to MoneyCentral calculations.
What this means is that in average for every Naira of shareholder equity, companies have N1.59 of debts.
The debt-to-equity ratio is a financial leverage ratio, which is frequently calculated and analyzed, that compares a company’s total liabilities to its shareholder equity. A higher ratio suggests higher risk and that the company is financing its growth with debt.
However, when a company is in its growth phase, a high D/E ratio might be necessary for that growth.
Cadbury Nigeria Plc; Debt to equity ratio: 1,7722%
Cadbury’s leverage ratio has weakened on the back of higher debt. Just like its peer rivals, it maintained a negative earnings per share (EPS) of (N5.45) as at September 2023, which led to a 78.41 percent reduction in retained earnings to N2.87 billion.
Total debt in the balance sheet surged by 107.25 percent to N49.59 billion as at September 2023 from N23.86 billion as at September 2022. Furthermore, Cadbury’s borrowings (+1.1x YTD to N49.61 billion) grew faster than cash.
Eterna Oil, Debt to equity ratio: 507.71%
The downstream oil and gas firm finances its operations with more debt than equity, and it posted a net loss caused by foreign exchange revaluation loss. Total debt spiked by 58.04 percent to N42.411 billion as at September 2023 from N26.83 billion the previous year.
Notore Chemical, Debt to Equity: 401.21%
Aside from the fact that Notore Chemical’s debt is 4.01 percent of equity, the debt to equity ratio jumped to 401.21 percent in September 2023 from 188.89 percent the previous year.
International Breweries, Debt to equity ratio: 278.87%
In the last six years, the brewer has been reeling from mounting financial obligations and the current monetary policies compounded the woes of whose losses are piling. Total debt was up 69.41 percent to N320.20 billion in September 2023 from N194.08 billion as at September 2022.
 Nigerian Breweries, Debt to equity ratio: 273.87%
The brewer capitulated to the macroeconomic headwinds as consumers have cut down spending, downgrading to cheaper brands. It is important to note that beer has become a luxury due to an incessant hike in price of the product to fend off rising input cost.
Total debt surged by 151.94 percent to N308 billion in the period under review from N122.25 billion the previous year.
TotalEnergies Marketing Nigeria Plc, Debt to equity ratio: 270.69%
TotalEnergies Marketing Nigeria (TMN) has total debt of N146.11 billion, which represents an increase of 270.69 percent to N146.11 billion as of September 2023 from N4747 billion as of September 2022.
Caverton Offshore Support GRP Plc, Debt to equity ratio: 268.64%
Caverton’s debt to equity ratio increased to 268.64 percent in September 2023 from 148.72 percent the previous year.
Flour Mills of Nigeria Plc, debt to equity ratio: 215.32%
The largest miller in Africa’s most populous nation was not impervious to the currency risk as it posted net loss of N8.51 billion as at September 2023, but it paid a dividend to its shareholders since it has a robust retained earnings.
Total debts were up 33.34 percent to N446.30 billion in the period under review from N349.69 billion as at September 2022.
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