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In this article, we will list 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 balloons debt in the books of corporations, and what 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. Obviously, 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 have 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 Naira devaluation.
7-MTN Nigeria Plc
Total Debt: N1,177bn
MTN Nigeria is another telecom firm that has landed on our lists of the most indebted firms in Nigeria. It has been issuing commercial papers to fund expansion plans. In December 2023, MTN Nigeria posted 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 the building material 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 increase in intercompany loans to $402.52 million in FY-23 from $318.52 million  as at 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 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 firms on our lists of most indebted firms in 2023. It struggles with short-term liquidity issues that makes 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 accumulated losses in its books. There is also higher finance costs.
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