Rising Debt Burden Hits Nigerian Firms as Liabilities Reach N3.6tn

A recent report has revealed that 15 listed companies on the Nigerian Exchange Limited recorded a combined non-current liability of N3.62 trillion as of September 2024, marking a 32.1% increase from N2.74 trillion in 2023. These long-term liabilities include loans, deferred tax liabilities, pension obligations, and lease liabilities, among others. The rising debt burden is attributed to high borrowing costs and limited access to credit, which have forced some companies to seek funding from international parent firms despite the high costs involved.

Among the affected companies, Nestlé Nigeria Plc saw its debt soar by 103.1% to N749.76 billion, while Seplat Energy’s liabilities surged by 83.5% to N1.48 trillion. Other firms, including Nigerian Breweries Plc and Lafarge Africa Plc, also reported significant increases. However, some companies, like Dangote Sugar Refinery Plc and Dangote Cement Plc, managed to reduce or marginally lower their debt levels. The trend highlights the growing financial pressure on businesses amid Nigeria’s challenging economic environment.

Financial analysts suggest that while rising debt levels pose concerns, companies with strong cash flows can still manage their obligations effectively. Proshare Nigeria’s Chief Economist, Teslim Shitta-Bey, emphasized that financial stability depends on a firm’s ability to generate free cash flow to meet its commitments. He noted that despite the rising debt, strategic debt management and long-term financing plans can help firms navigate economic challenges and maintain stability in the market.