Job losses loom as N3.9trn debt may cripple 22 firms

****As 18 firms meet adequate cash/debt ratio cover *

***Debt exceeds cash in 22 companies

By Peter Egwuatu

A wide disparity in the ability of companies listed on the Nigerian Exchange Limited, NGX, to cover their debt obligations with cash has emerged, with some companies holding several times more cash than debt, while others have cash covering only a fraction of their outstanding borrowings.

Analysts noted that the cash/debt position of some of the listed companies could affect investment, employment, production and capital-market development.

The available data obtained by Vanguard, covering 40 companies in the second quarter of 2026, showed a combined total debt of N3.9 trillion, out of which 18 firms have cash/debt ratios of at least 1.0 times, indicating that their cash holdings are equal to or greater than their total debt, while 22 companies have ratios below 1.0 times, meaning their total debt exceeds cash on hand.

The cash/debt ratio measures a company’s ability to meet its debt obligations using cash available to it. A ratio above 1.0 times generally indicates that a company has sufficient cash to cover its total debt, although the ratio does not, on its own, measure overall financial strength or debt-servicing capacity.

Cash/debt analysis

On the table of the cash/debt analysis, HBM Nigeria led, with a cash/debt ratio of 319.07 times, based on cash of N393.68 billion and total debt of N1.23 billion.

It was followed by UPDC Real Estate Investment Trust, with 283.73 times, from cash of N7.15 billion against debt of only N25.2 million, while eTranzact International recorded 214.89 times, with N23.69 billion cash and N110.24 million debt.

CWG also recorded a high ratio of 211.1 times, with cash of N7.4 billion compared with total debt of N35.06 million.

Other companies with substantial cash coverage included Unilever Nigeria, with a ratio of 44.8 times; Berger Paints, 18.4 times; Industrial & Medical Gases, 13.56 times; and NASCON Allied Industries, 12.72 times.

Companies with stronger cash cover

The available data, as gathered by Vanguard, also showed that several major companies had cash exceeding their debt.

Vitafoam Nigeria recorded 5.88 times, while UPDC posted 5.47 times. International Breweries had 3.34 times, Sterling Financial Holdings 3.08 times and May & Baker Nigeria 2.83 times.

Livestock Feeds recorded 1.94 times, Julius Berger Nigeria 1.85 times, Chams Holdings 1.65 times and Dangote Cement 1.31 times. Skyway Aviation recorded 1.19 times.

The figures suggest that these companies have, based purely on cash on hand relative to total debt, a degree of liquidity protection against debt obligations.

However, analysts caution that a high cash/debt ratio should not automatically be interpreted as evidence that a company is more profitable or efficiently managed.

Debt exceeds cash in 22 companies

At the other end of the spectrum, Aradel Holdings recorded a cash/debt ratio of 0.96 times, with cash of N1.77 trillion against total debt of N1.84 trillion.

Ellah Lakes recorded 0.81 time, John Holt 0.77 times, Academy Press 0.72 times and Eterna 0.69 times. ABC Transport had 0.58 times, while Cadbury Nigeria and Fidson each recorded 0.53 times.

The ratio fell further among BUA Cement, at 0.46 times; BUA Foods, 0.44 time; Beta Glass, 0.34 time; Conoil, 0.20 times; Guinness Nigeria, 0.16 times; and Champion Breweries, 0.16 times.

DAAR Communications recorded 0.14 time, while Cutix and Japaul Gold & Ventures each recorded 0.11 times.

Geregu Power had 0.09 times, FTN Cocoa Processors 0.08 times, C & I Leasing 0.07 time, Chellarams 0.05 times and Caverton Offshore Support Group the lowest at 0.03 times.

This means, for example, that Caverton’s N2.46 billion cash position represents only a small fraction of its N87.15 billion total debt, while Chellarams had N235.16 million cash against N5.12 billion debt.

Implications for companies

Market analysts said the cash/debt ratio provides investors with an important indication of the liquidity pressure facing companies, particularly in an environment where the cost of borrowing remains significant.

They noted that companies with ratios substantially above 1.0 time have greater cash buffers with which to meet debt obligations, fund working capital and withstand temporary disruptions in revenue.

However, they said excessive cash holdings could also raise questions about whether funds are being deployed productively.

According to the analysts, a very high cash/debt ratio may be positive from a liquidity perspective, but investors should examine why the company is holding so much cash instead of investing it in productive assets, expanding operations, reducing debt or returning capital to shareholders.

For companies with ratios below 1.0 time, the concern is different. A low ratio does not necessarily mean that a company is in financial distress because businesses generate operating cash flows and may have access to undrawn credit facilities and other sources of liquidity.

Nevertheless, analysts said a persistently low ratio could expose companies to refinancing and interest-rate risks, particularly where debt repayments fall due before sufficient operating cash is generated.

Implications for shareholders

For shareholders, the ratio has implications for both risk and returns.

Companies with relatively strong cash positions may have greater flexibility to service debt, maintain operations during difficult periods and finance expansion without immediately resorting to additional borrowing or equity dilution.

On the other hand, companies with low cash/debt ratios may face higher financial risk if earnings or operating cash flows weaken.

Analysts, however, stressed that shareholders should not make investment decisions based solely on the ratio.

They said investors should consider profitability, operating cash flow, interest expenses, debt maturity profile, working-capital requirements, asset quality and management’s capital-allocation strategy alongside the cash/debt position.

Implications for Nigerian economy

At the broader economic level, analysts said the cash/debt position of listed companies could affect investment, employment, production and capital-market development.

Companies carrying heavy debt burdens may devote a larger proportion of their earnings to interest and principal repayments rather than expansion, technology, employment and dividend payments.

Where debt is used productively, however, leverage can support expansion and increase productive capacity.

The implication, analysts said, is that the quality and use of debt matter as much as the amount of debt itself.

A company with a low cash/debt ratio but strong and predictable operating cash flow may be able to manage its obligations effectively, while a company with a high cash/debt ratio but weak operations could still face business challenges.

For the Nigerian economy, the ability of listed companies to maintain adequate liquidity is therefore important because financially stable businesses are better positioned to sustain production, employment, tax payments and investment.

Cash/debt ratio not a standalone measure

Analysts therefore advised investors to treat the cash/debt ratio as one component of a wider financial-health assessment.

The data shows a clear divide: while some NGX-listed companies have cash positions several times larger than their debt, others have debt that is many multiples of their available cash.

The difference highlights the varying approaches of companies to borrowing, liquidity management and capital allocation and provides investors with an additional indicator for assessing financial risk.

Analysts’ comments

Ambrose Omordion, Chief Operating Officer, InvestData Consulting Limited, said investors should not assess debt in isolation but should examine earnings, cash flow, interest-cover ratios and the maturity profile of borrowings.

He said a high level of debt could magnify shareholder returns when borrowed funds are invested in profitable projects, but could also magnify losses when earnings and cash flows weaken.

The same principle applies to the cash-to-debt ratio.

A company with a low ratio but strong and predictable operating cash flow may remain financially stable, while a company with a high ratio but weak operations may face longer-term challenges if its cash balance is not being replenished.

Impact on companies

For the companies themselves, high cash cover provides an important cushion in an environment of elevated interest rates.

Companies that need to refinance maturing loans may face higher finance costs when new loans are contracted. Those with significant cash can repay some debt, negotiate from a stronger position with lenders or fund part of their capital expenditure internally.

This could reduce finance costs and improve profitability.

Commenting on the ratios, economic and communications expert, Clifford Egbomeade, said: “The interpretation of cash and debt should go beyond the ratio itself,” stressing that investors should examine the quality and utilisation of the cash.

According to him: “A company with substantial cash and low debt has greater flexibility to respond to economic shocks, finance expansion or take advantage of investment opportunities without immediately resorting to expensive borrowing.

“This is particularly relevant in Nigeria where corporate borrowing costs remain relatively high.

“Some companies deliberately retain cash to finance inventories, capital expenditure, acquisitions, dividend payments and other strategic commitments.

“In addition, cash and cash equivalents may include restricted funds or short-term investments that cannot necessarily be deployed immediately.

“This means that shareholders should examine the composition of cash before drawing conclusions about a company’s liquidity.”

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