Nigerian companies are concluding the final quarter of 2023 with a historic cash reserve of N2.3 trillion, marking the highest cash balance in recent history.
This data, compiled from over 30 major companies listed on the Nigerian Exchange throughout the year, showcases a 27% increase from the N1.8 trillion reported at the end of 2022.
Excluding commercial banks and insurance companies, these entities reported total revenues of N8.05 trillion during the year, highlighting their resilience amid macroeconomic challenges and subsequent monetary policy tightening. This liquidity is particularly notable in a year when the country experienced its highest money supply ever, exceeding N66 trillion by the end of September 2023.
The total cash reserves at the end of the third quarter surged to N2.3 trillion from N1.8 trillion at the close of 2022. The data indicates a positive trend in cash flow from day-to-day operations, with companies accumulating N1.7 trillion in revenues by the third quarter. This suggests effective conversion of sales into cash and the ability to cover operating expenses.
Dangote Cement, Seplat, MTN, and Dangote Sugar were highlighted as companies with the largest cash reserves. While some companies increased net cash from operations, they also relied on debt financing. The total outstanding debt for the companies reached N4.9 trillion by the third quarter, compared to N3.3 trillion at the end of 2022. The total balance sheet size for the companies rose to N17.3 trillion in 2023, reflecting the impact of macroeconomic factors on company assets.
Looking ahead to 2024, the substantial cash reserves position Nigerian companies favorably for the challenges of a tightening monetary policy environment. Companies will face strategic decisions on whether to distribute cash as dividends or reinvest it for operational and growth initiatives.
The increased cash reserves and companies’ ability to navigate economic headwinds suggest a potentially favorable climate for dividends and resilient share performance. Investors will be keenly observant, aligning with entities showcasing fiscal responsibility and strategic foresight.
In conclusion, these significant cash reserves provide a dual advantage, acting as a shield against short-term economic turbulence and serving as a strategic foundation for long-term investments and growth initiatives. Companies that manage these reserves judiciously are likely to emerge as leaders in the evolving economic landscape in 2024. Investors will be keenly observant, aligning with entities showcasing fiscal responsibility and strategic foresight.
