Companies with the largest debt in Nigeria – June 2022

A review of the recent earnings published by some of Nigeria’s largest publicly quoted companies reveal a general increase in borrowing as a percentage of equity in the second quarter of 2022.

Some of the major Nigerian businesses such as telcos, consumer goods, oil and gas firms, brewery and agro-allied mostly tapped the debt market to shore up working capital and capital expenditure requirements.

A cursory review shows total debts for some of the companies under reviews shows total debt including short- and long-term loans increased from N2.5 trillion to N2.8 trillion respectively between the end of 2021 and the second quarter of 2022.

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The data adjusted for the calendar year as some companies report various financial year ends.

Dissecting the data

MTN, Dangote Cement, BUA Cement, Seplat, Flour Mills and Notore all topped the largest borrower’s data with over N2 trillion in debts higher than the N1.8 trillion debt balance as of December 2021.

The debt ranges from corporate bonds, bank loans, CBN intervention loans, external loans, grants, and other forms of debts borrowed at interest rates commensurate to the type of borrowing.
In terms of debt-to-equity ratio a measure for the amount of debt compared to a company’s net assets, the likes of Ardova Plc, Nestle Nigeria Plc, MTN Nigeria Plc, Caverton Plc and Honeywell Plc made the list in this category during the second quarter of 2022.
The companies all reported debt to equity ratios (gearing ratios) of over 1x with some rising as high as 2x their equity in leverage ratios.

Top borrowers

MTN Nigeria – N646 billion

MTN Nigeria during the second quarter of 2022 had a debt-to-equity ratio of 2.4x, a decline from 2.89x in 2021.

In Q2, the company’s total debt increased to N646.110 billion from N342.339 billion in 2021, an increase of N303.771 billion or 88.73% in 2022.
MTN Nigeria Plc recently notified the Nigerian Exchange Limited and the investing public of its proposed issuance of up to N23 billion series 3 commercial paper notes under its N150 billion commercial paper issuance programme.
MTN Nigeria Communications had issued a historic N127 billion Series 1 & 2 Commercial Paper (CP) under its registered N150 billion programme.
MTN Nigeria reported a total profit of N181 billion for the first half of the year 2022. The amount is 28% more than what was recorded in the same period of last year at N141.8 billion.
Incredibly the company’s return on average equity is over 100% suggesting that its business model supports heavy reliance on leverage.

Dangote Cement – N634 billion

Nigeria’s Cement Giant currently owes a whopping N634.4 billion in debt at the end of the second quarter of 2022 compared to N577.9 billion at the end of last year.

The company’s debt to equity ratio has increased from 0.59x to 0.82x reflecting a function of higher borrowing.
In April 2022, Dangote Cement issued additional bonds with face value of N116 billion bringing the total publicly issued bonds to N266 billion as of 30 June 2022 (December 2021: N150 billion) with the coupon rate of 11.25% to 13.5%.
Dangote also reported record revenues in the first half of the year posting a N808 billion up from N690 billion same period last year.
The company’s cash flow is also robust enough to meet their current debt obligations.

Seplat – N319.4 billion

Nigeria’s indigenous oil and gas firm, Seplat reported a total debt balance of N319.4 billion as of June 2022 up from N315.79 billion as of December 2021.

The company’s debt to equity ratio is 0.44x largely unchanged from 0.45x reported at the end of December 2022.
Seplat has enjoyed improved revenue and profits in the last year as oil price surged on the back of increased demand following relaxed Covid-19 restrictions.
For example, the company reported a profit of N35.4 billion in the first half of the year compared to N14.1 billion.
In March 2021, the Group offered 7.75% senior notes with an aggregate principal of ₦266.6 billion due in April 2026. The notes, which were priced on 25 March and closed on 1 April 2021, were issued by the Group in March 2021 and guaranteed by certain of its subsidiaries.
Seplat also collected $110 million in Reserved based lending (RBL) facility in March 2021 The Group through its subsidiary Westport on 5th December 2019 entered into a five-year loan agreement with interest payable semi-annually. The RBL facility has an initial contractual interest rate of 8% +Libor as at half year (8.2%) and a settlement date of 29 November 2023.
Seplat is also in a bidding war for Mobil Oil Unlimited assets in Nigeria which is estimated at over $1 billion, which could further add to their debt.

BUA Cement

Nigeria’s second largest cement maker reported a total debt profile of N200 billion largely unchanged from the N201.6 billion reported at the end of 2021.

The company’s debt to equity ratio is 0.44x as of June 2022 compared to 0.51x reported at the end of 2021.
BUA Cement has seen its debt rise past N200 billion as it ramped up development of its cement plans especially in the Northern part of the country.
The Company reported it issued a N115 billion semi-annual coupon bond at the rate of 7.5% per annum in December 30, 2020.
The Bond proceeds were used to reimburse the shareholder loan and for working capital finance.
BUA has also reported improved profitability over the years generating an operating profit of N77.7 billion half year 2022 compared to N50.5 billion same period last year.

Flour Mills

Nigeria’s largest flour milling company reported its total external debts rose to N142.8 billion as of June 2022 compared to N132.6 billion as of December 2021.

Flour Mills debt to equity ratio is about 0.8x up from 0.76x as of December 2022 suggesting its debt has increased as a portion of equity.
Flour Mills loans come from diverse sources which includes CBN Intervention Funds, Corporate Bond issuances, bank borrowing, and loans from the Bank of Industry.
Its CBN loans are about N88 billion while the BOI loans ae around N33.3 billion. The company also has a commercial paper and bonds valued at combined of about N54 billion.
Flour Mills also recently completed the acquisition of Honeywell Flour Mills in a deal valued at about over N20 billion. The company reported it paid out N14.1 billion as of June 2022.