NIGERIA: Twenty-two companies listed on the Nigerian Exchange Limited (NGX) had cash/debt ratios below 1.0 in the second quarter of 2026, indicating that their reported cash holdings were lower than their total debt obligations.
The companies were among 40 NGX-listed firms covered in available financial data showing combined debt of about N3.9 trillion, reports Vanguard.
A cash/debt ratio compares a company’s available cash with its total debt and provides an indication of its liquidity position. However, a ratio below 1.0 does not, on its own, mean that a company is financially distressed, as businesses may generate operating cash flows or have access to other sources of liquidity.
The analysis showed a wide disparity in the ability of listed companies to cover their debt obligations with cash. While 18 of the 40 companies had cash/debt ratios of at least 1.0, the remaining 22 had ratios below 1.0.
At the top of the table was HBM Nigeria, with a cash/debt ratio of 319.07 times, based on cash of N393.68 billion against total debt of N1.23 billion.
UPDC Real Estate Investment Trust followed with 283.73 times, having N7.15 billion in cash compared with N25.2 million in debt, while eTranzact International recorded 214.89 times, with N23.69 billion cash against N110.24 million debt.
CWG recorded 211.1 times, based on N7.4 billion cash and N35.06 million total debt.
Other companies with substantial cash cover included Unilever Nigeria, with 44.8 times; Berger Paints, 18.4 times; Industrial & Medical Gases, 13.56 times; and NASCON Allied Industries, 12.72 times.
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, Dangote Cement 1.31 times, and Skyway Aviation 1.19 times.
22 firms have less cash than debt
At the other end of the spectrum, Aradel Holdings recorded a cash/debt ratio of 0.96 times, with N1.77 trillion in cash against N1.84 trillion debt.
Ellah Lakes followed with 0.81 times, John Holt 0.77 times, Academy Press 0.72 times, and Eterna 0.69 times.
ABC Transport recorded 0.58 times, while Cadbury Nigeria and Fidson each had 0.53 times.
The ratio fell to 0.46 times for BUA Cement, 0.44 times for BUA Foods, 0.34 times for Beta Glass, 0.20 times for Conoil and 0.16 times each for Guinness Nigeria and Champion Breweries.
DAAR Communications recorded 0.14 times, while Cutix and Japaul Gold & Ventures each had 0.11 times.
Geregu Power recorded 0.09 times, FTN Cocoa Processors 0.08 times, C & I Leasing 0.07 times, Chellarams 0.05 times, while Caverton Offshore Support Group had the lowest ratio at 0.03 times.
Caverton’s N2.46 billion cash position, for instance, represented only a small fraction of its N87.15 billion total debt. Chellarams had N235.16 million cash against N5.12 billion debt.
Debt burden raises refinancing concerns
Market analysts said the cash/debt position provides investors with an important indication of the liquidity pressures facing companies, particularly in an environment where borrowing costs remain significant.
According to them, companies with cash/debt ratios substantially above 1.0 have larger cash buffers to meet debt obligations, finance working capital and withstand temporary disruptions in revenue.
However, analysts cautioned against treating a high ratio as automatic evidence of superior financial performance, noting that investors should also examine how effectively companies deploy their cash.
A very high cash/debt ratio could raise questions about whether available funds are being invested in productive assets, used to expand operations, deployed to reduce debt or returned to shareholders.
For companies with ratios below 1.0, analysts said the figures should similarly be viewed in context.
A low ratio does not necessarily indicate financial distress, as companies can generate operating cash flows, access undrawn credit facilities or rely on other sources of liquidity.
However, a persistently low ratio could increase refinancing and interest-rate risks, particularly where substantial debt repayments become due before sufficient operating cash is generated.
Employment, investment implications
The financial position of heavily indebted companies could have wider implications for investment, production and employment if high financing costs constrain their ability to expand operations.
Companies devoting a larger proportion of earnings to interest and principal repayments may have less internally generated funds available for capital expenditure, technology, expansion and job creation.
However, analysts noted that debt can also support business expansion when borrowed funds are invested productively.
Ambrose Omordion, Chief Operating Officer of InvestData Consulting Limited, said investors should assess debt alongside earnings, cash flow, interest-cover ratios and the maturity profile of borrowings.
He said high debt could magnify shareholder returns when borrowed funds were invested in profitable projects, but could equally magnify losses when earnings and cash flows weakened.
According to Omordion, a company with a low cash/debt ratio could remain financially stable if it had strong and predictable operating cash flow, while a company with a high ratio could still face longer-term challenges if its operations were weak.
Cash position not enough to determine financial health
Economic and communications expert Clifford Egbomeade also cautioned investors against relying solely on the cash/debt ratio.
He said companies with substantial cash and low debt generally have greater flexibility to respond to economic shocks, finance expansion and pursue investment opportunities without immediately resorting to expensive borrowing.
Egbomeade noted that this was particularly relevant in Nigeria, where corporate borrowing costs remain relatively high.
He added that some companies deliberately retain cash to finance inventories, capital expenditure, acquisitions, dividend payments and other strategic commitments.
He also cautioned that cash and cash equivalents could include restricted funds or short-term investments that might not be immediately available for general corporate use.
He therefore advised shareholders to examine the composition and quality of a company’s cash before drawing conclusions about its liquidity.
The data ultimately highlights significant differences in the borrowing and liquidity positions of NGX-listed companies, while analysts stressed that cash/debt ratios should be considered alongside profitability, operating cash flow, interest expenses, debt maturity profiles, working-capital requirements and capital-allocation strategies.
