18 Nigerian firms increased their liquidity by 77 percent in the first nine months of 2023 amid the uncertainties in the country’s business landscape.
BusinessDay analysed the firms across various sectors, including fast-moving consumer goods, cement, healthcare, and telecommunications.
The firms’ combined cash and cash equivalent reserves were N1.53 trillion, an increase from N862.8 billion in the first nine months of 2022.
Cash equivalents represent short-term investment securities characterised by high credit quality and liquidity.
The elevated cash balances underscore the liquidity resilience of the companies amid a challenging macroeconomic environment and subsequent tightening of monetary policy.
An increase in cash and cash equivalent translates to piling cash in case interest rates rise and borrowing becomes more expensive,
A breakdown of the statement showed cement manufacturers reported the highest cash and cash equivalent reserves, totalling N617.16 billion, an increase from the N198.3 billion recorded in 2022.
Mustapha Umaru, an industry and equity research analyst at CSL Stockbrokers Limited said that cement companies’ rising cash reserves highlight their strong financial position.
“Even amidst economic difficulties, they haven’t needed to dip into their cash cushion to maintain operations. This demonstrates their healthy liquidity and ability to weather future economic pressures,” Umaru said.
Umaru added that looking ahead to 2024, despite current profitability, these companies may choose to either distribute profits to shareholders through dividends or reinvest them back into their operations.
Fast-moving consumer goods (FMCG) companies secured the second position, recording N529.4 billion in cash and cash equivalents compared to N409.3 billion in the corresponding period of 2022.
For consumer goods firms, maintaining a substantial cash reserve ensures the availability of funds to fulfil both short- and long-term obligations to creditors.
It also enhances owners’ earnings through consistent dividend payments and facilitates expansion initiatives, such as venturing into new products or business chains.
Brewery manufacturers followed suit, reporting N125.35 billion in cash and cash equivalents, a notable increase from the N103.47 billion recorded in 2022.
The health sector reported the lowest cash and cash equivalent amount, totalling N32.9 billion, up from N24.9 billion in 2022.
The movement of cash and cash equivalents that come in and go out of a company is summarised in the cash flow statements of these firms.
The main components of these include operating activities, investing activities, and financing activities.
Industry breakdown
Cement makers
Cement makers recorded a 211 percent increase in cash and cash equivalent to N617.2 billion in the period under review.
Dangote Cement recorded the highest cash and cash equivalent amounting to N304.2 billion, up from N86.8 billion recorded in 2022.
Its cash flow which includes cash and bank balances stood at N209.9 billion and short-term deposits at N175.3 billion. Bank overdrafts used for cash management purposes were deducted which was N81.11 billion.
BUA Cement recorded N158.4 billion as its cash and cash equivalents, a 414.8 percent increase. The breakdown includes cash in hand amounting to N22.93 billion, the Bond DSRA Account totalling N4.68 billion, and EOSB Fixed Deposit reaching N2.55 billion.
Lafarge Cement cash and cash equivalents amounted to N154.6 billion, a 92 percent increase.
FMCGs
FMCG companies recorded an increase in cash and cash equivalents, rising by 29.3 percent to N529.4 billion in the first nine months of 2023.
Dangote Sugar reported the highest cash and cash equivalent during this period, totalling N159.2 billion, although it marked a reduction compared to the N174.9 billion recorded in the same period of 2022.
Nestle Nigeria documented N152.27 billion as its cash and cash equivalent, an increase from the N107.1 billion recorded in 2022. Short-term investments amounted to N124.03 billion, while cash and bank balances totalled N28.23 billion.
BUA Foods recorded N79.8 billion as its cash and cash equivalent, a growth from the N30.47 billion recorded in 2022.
Cash at the bank stood at N82.95 billion, cash in hand amounted to N1.92 billion, and the deducted overdraft reached N3.17 billion
Unilever Nigeria’s cash and cash equivalent totalled N73.8 billion, up from N61.55 billion in 2022. Fixed deposits reached N48.26 billion, and cash at bank and in hand amounted to N25.54 billion.
Cadbury Nigeria reported N41.5 billion as its cash and cash equivalent, an increase from the N23.8 billion recorded in 2022. Call deposits amounted to N32.7 billion, while bank balances totalled N8.8 billion.
Nascon Allied Industries recorded N22.79 billion as its cash and cash equivalent, showing growth from the N11.4 billion recorded in 2022. Bank balances reached N22.78 billion, and cash on hand was N4.76 million.
Brewers
Brewer recorded N125.35 billion as its cash and cash equivalent compared to N103.47 billion recorded in 2022.
Guinness Nigeria recorded N76.32 billion as its cash and cash equivalent, showing growth from the N63.9 billion recorded in 2022. Bank balances reached N42.7 billion, with short-term deposits totalling N33.6 billion.
International Breweries reported N27.9 billion as its cash and cash equivalent, up from the N24.85 billion recorded in 2022. Cash at the bank totalled N17.45 billion, while restricted cash amounted to N10.44 billion.
Nigeria Breweries recorded N21.13 billion as its cash and cash equivalent, a rise from the N14.69 billion recorded in 2022.
Telecommunications
MTN Nigeria recorded N224.86 billion as its cash and cash equivalent in the period under review from N126.75 billion recorded in 2022. Bank balances totalled N158.26 billion, short-term deposits totalled N66.60 billion.
Airtel Africa’s cash and cash equivalent totalled $735 million compared to $963 million recorded in 2022.
Healthcare
The health sector recorded N32.9 billion as its cash and cash equivalent amount, up from N24.9 billion in 2022.
GlaxoSmithKline reported the highest cash and cash equivalents, amounting to N24.17 billion, an increase from the N18.2 billion recorded in 2022. The current account balances totalled N22.05 billion, with restricted cash amounting to N2.11 billion.
May and Bakers recorded N3.31 billion as its cash and cash equivalent, slightly down from the N3.51 billion recorded in 2022.
Cash at bank totalled N2.02 billion, short-term deposits amounted to N1.36 billion, and cash in hand, along with undeposited cheques, totalled N67 million.
Fidson’s cash and cash equivalent reached N3.11 billion, a growth from the N2.79 billion recorded in 2022. Bank balances totalled N3.8 billion, cash at hand amounted to N50.4 million, and short-term deposits (including demand and time deposits) reached N221,000.
Neimeth reported N2.35 billion as its cash and cash equivalent, an increase from the N0.45 billion recorded in 2022.
