Nigerian companies have entered the final quarter of the year with a record cash reserve of N2.3 trillion, marking the largest cash balance in recent history.
The data, compiled from over 30 of the largest companies listed on the Nigerian Exchange, excludes commercial banks and insurance companies.
This cash balance represents a significant 27% increase from the N1.8 trillion reported at the end of 2022, with these companies collectively reporting total revenues of N8.05 trillion during the period.
The robust cash reserves underscore the liquidity of Nigerian companies, demonstrating their resilience in a year marked by macroeconomic challenges and monetary policy tightening. Despite economic headwinds, the companies were able to generate positive operating cash flow, indicating their ability to convert sales into cash and cover operating expenses.
Top companies with the largest cash reserves include Dangote Cement, Seplat, MTN, and Dangote Sugar.
Although companies generated increased net cash from operations, some relied on debt financing, with total outstanding debt reaching N4.9 trillion as of the third quarter of 2023, compared to N3.3 trillion at the end of 2022.
The total balance sheet size for the companies also rose to N17.3 trillion in 2023, reflecting the impact of various macroeconomic factors on company assets.
As Nigerian companies navigate the uncertainties of a tightening monetary policy environment, the substantial cash reserves offer a strategic advantage, providing a financial buffer and potential for strategic investments.
The decision between distributing cash to shareholders as dividends or reinvesting in operations and growth initiatives will be critical for companies in 2024. Investors will closely monitor entities demonstrating fiscal prudence and strategic acumen in the evolving economic landscape.