MTN maintains its position as largest debtor with N578 billion in external loans

… others rely on cash flow to pay off their debts.

Nigeria’s largest telecommunications company, MTN, retained its position as the largest borrower on the stock market after reporting a total short and long-term loan balance of N578 billion in June 2021. MTN ranked in the above all companies listed on the Nigerian stock exchange. exchange when it came to borrowing from banks and the debt market.

The company is well known for strategically relying on loans to drive its operations, resulting in astronomical returns on average equity, often in the double digits. In December 2020, MTN’s total external lending was N521.5 billion and grew by 11% in less than 6 months. This puts its debt at 2.8 times its equity. The closest to MTN relying on debt to boost its profits and operations is Nestlé Nigeria Plc. Nestlé’s debt-to-equity ratio is also 2.27x and shows an annualized return on equity of nearly 60%. MTN’s return on average equity is just over 60%.

cement giants

While MTN has focused on increasing its leverage profile, Nigerian cement giants, Dangote Cement, Lafarge and BUA have taken the opposite direction, all seeing massive declines in their loan book. Dangote Cement, one of Nigeria’s largest companies by profit and largest by market capitalization, reduced its total external debt by 30.5% from N493.9 billion in December to N197. .9 billion naira in June 2021. Lafarge reduced its debt profile by 60.3% to 19.75 billion naira while BUA reduced its own debt by 30.5% to 191 billion naira.

No new capital was raised by the trio in the first half of 2021 as they focused on organic cash flow to pay down debt. According to our research, companies have paid off their debts from the cash flows generated by transactions linking them with larger trade creditors. Between the three cement giants, they generated N469.7 billion in net cash flow from operations by paying off N409.7 billion in debt.

food processors

Much like MTN, major food processors like Nestlé, Flour Mills and Honeywell relied heavily on debt to drive their operations during the review period. Their debt profile increased to 260 billion naira from 247 billion naira in the six months between December and June 2021. Flour Mills retained the largest loan portfolio at 140.9 billion naira, lower than the 147 billion naira reported in December. Honeywell, which has been in contention with the CBN over its loans to First Bank, increased its loans to 67.6 billion naira from 59.4 billion naira. Nestlé also increased its loan portfolio by 29% to N51.9 billion. It seems that the strategy of these companies is to finance operations by relying on debt to increase revenues and improve returns.

Food processing companies have seen their profits rise dramatically since the start of border closures and the currency crisis that has hampered the import of competing goods and services. For example. Flour Mills recorded 6-month pre-tax profits of N20.9 billion between January and June 2021, compared to N11.6 billion in the corresponding year. So, despite burdening their balance sheets with debt, profits and margins remain high despite the rising cost of borrowing. The strategy here is to use cheaper debt to fund operations and increase net income, a well-known strategy of high return on assets companies, especially in a low interest rate environment.


Guinness and International Breweries also increased their debt holdings during the period, while Nigerian Breweries reduced its debt. International Breweries, the second largest brewer, increased its debt from N110.6 billion to N113.6 billion, making it one of the biggest borrowers on the stock exchange. Most of the company’s loans are denominated in dollars and obtained from CitiBank, New York.

Nigerian Breweries has reduced its debt by around 25.3% to N68.2 billion by financing it from working capital, suggesting it has repaid its borrowings at the expense of commercial creditors. It is also a basic cash strategy used by large multinationals with strong credit ratings among suppliers.

The breweries appear to have passed the milestone in 2021, with all three seeing increased revenue generated by selling more volumes while raising prices. Although margins remain a challenge, it looks like they are earning enough to pay off their debts in the face of competition and rising liquor prices.

Energy companies

Two of the major energy companies, Notore Chemicals and Seplat, reported a higher debt portfolio in June 2021 compared to December 2020. Seplat saw its debt swell to 309.7 billion naira from 265.3 billion naira while Notore added about 8 billion naira to its debt to take in 123.26 billion naira. For Seplat, its debt ratio is a manageable 0.46, although it spends N46 out of every N100 generated from operations to service debt. Notore is in a more precarious situation with a debt ratio of 2.61 and is almost certain that the company will raise capital sooner rather than later. The company’s finance cost of N8.4 billion over the past two quarters is higher than its revenue of N5.3 billion over the same period. Other smaller oil and gas companies like Ardova, Conoil and Total also saw higher borrowing in June compared to December. Downstream oil and gas companies typically finance their operations with debt.


Transcorp and UACN, two of the country’s major conglomerates, also took on debt during the period under review. For example, Transcorp has increased its debt profile from N119 billion in 2020 to N125 billion by June 2021. The company’s debt is now greater than its net assets. UACN also increased its debt from N4.5 billion to N17.5 billion despite selling its real estate arm to Custodian Insurance Plc. Despite the rise, earnings were not negatively affected. The duo reported a higher rise in profits, of more than 600% to around 7 billion.

At the end of the line

The information suggests that debt management tactics vary across sectors. However, companies in the same sector have adopted the same debt strategy. Apart from a few companies, the others have avoided the negative impact of debt on earnings, with some even posting higher returns on average equity.

The financial cost has been cheap for these companies, allowing them to tap into a combination of bank debt and long-term and short-term debt securities to finance their operations. It should also be noted that those who repaid their debts did so from cash flow generated by the business rather than raising equity.