Nigeria’s biggest firms get a breather as working capital hits N2.27trn

Nigerian firms are showing early signs of financial relief as their ability to meet short-term obligations rises, signaling that the liquidity pressures that have weighed on businesses are finally easing

According to BusinessDay’s analysis of the biggest firms, which recorded a positive working capital, including BUA Foods, Seplat Energy, Geregu Power, Transcorp Power, Lafarge Africa, International Breweries, Presco Plc, Okomu Oil, United Capital Plc, and Transnational Corporation, collectively reported a 43.6 percent increase to N2.27 trillion in H1’25 from N1.58 trillion in the same period of last year.

United Capital led with the highest positive working capital at N1.09 trillion, followed by Seplat Energy with N491 billion and BUA Foods with N292 billion.

Working capital, which is the difference between current assets and current liabilities, is a key gauge of a company’s ability to meet its short-term obligations and maintain smooth operations.

A positive and growing figure means companies are holding enough liquid assets to cover debts, pay suppliers, and fund day-to-day business activities without relying heavily on new borrowing.

“This is a clear indication that firms are holding more liquid assets to cover their obligations, which is crucial in the current inflationary environment,” said Tunde Adebayo, an independent capital markets analyst. “Management teams are prioritising cash flow efficiency to stay competitive and avoid costly external financing.”

Israel Odubola, a research analyst, said an improved liquidity position of the firms can be tied to stronger macro fundamentals.

“The FX rate has stabilised a lot and even appreciated. Inflation has been decelerating for five months now. So bringing these together has enabled firms to meet their short-term obligations,” he added.

Revenue growth drives liquidity boost

Industry analysts attribute the improvement partly to aggressive cost management, inventory optimisation, and increased revenue generation in the first half of 2025.

Data gathered by BusinessDay disclosed that the ten surveyed firms’ revenue increased by 75.4 percent to N6 trillion from N3.42 trillion during the period under review.

Sectorally, energy firms such as Seplat and Geregu benefited from higher gas sales and improved collection efficiency, while consumer goods players like BUA Foods and International Breweries enjoyed strong demand despite high food prices.

Tight monetary policy shapes corporate strategy

With the Central Bank of Nigeria (CBN) keeping its benchmark interest rate at 27.5 percent for the third consecutive meeting, companies have little incentive to take on expensive bank debt. This has forced management teams to find liquidity internally.

Tunde Abioye, a research analyst at FBNQuest, said that most of the firms have been delaying their capital investment projects because of the elevated interest environment – i.e., not a good time to borrow money given the potential surge in interest cost.

“So the best alternative for them is to park their excess cash in high-yield investment securities. It’s a good time for that,” he said.

This year, the monetary policy committee (MPC) has held its interest rate three consecutive times at 27.5 percent, thereby keeping lending rates high. This has made efficient working capital management even more important for companies seeking to avoid expensive bank borrowing.

However, as the MPC prepares for its 302nd meeting, Yemi Kale, group chief economist and managing director of research and trade intelligence at the African Export-Import Bank (Afreximbank), has urged caution in the committee’s interest rate decision.

He said cutting rates too early could reignite inflation and undermine foreign exchange stability.

“But holding rates too high for too long entrenches reliance on volatile foreign portfolio investments and crowds out both domestic investment and critical FDI needed for industrialization and job creation,” he said.

The economy’s inflation rate, which has been the single biggest drag on corporate profitability, is finally retreating. Headline inflation eased for the fifth consecutive month to 20.12 percent in August 2025, down from 21.88 percent in July. Food inflation, which has disproportionately hurt household demand and corporate margins, also slowed, bringing some relief to both producers and consumers.

Figures from the National Bureau of Statistics show that gross national product (GDP) expanded by 3.13 percent year-on-year in Q1 2025, powered by services (4.33 percent growth), agriculture, and other non-oil sectors.

According to the Stanbic IBTC purchasing managers index (PMI) data, the headline PMI rose to 54.2 in August from 54.0 in July, marking the ninth consecutive month above the 50.0 benchmark that separates growth from contraction.

“The increase in business activity was driven by sharper increases in output and new orders,” said Muyiwa Oni, head of equity research for West Africa at Stanbic IBTC Bank.

Some forms remain under pressure

Despite the economy showing signs of recovery, some firms are yet to recover from macroeconomic pressures, as some listed companies still struggle to meet their short-term obligations.

Among Nigeria’s 30 biggest firms, Oando Plc (N3.17 trillion), MTN (N1.3 trillion), and Dangote Cement (N702 billion) reported the highest negative working capital in the first six months of the year.

Nigerian Breweries (N106 billion), Dangote Sugar Refinery (N43 billion), BUA Cement (N34 billion), Trancorp Hotels (N17 billion), and Nestle Nigeria (N40 billion).

Odubola noted that if companies continue to see a negative working capital in the second half, they will likely face a slowdown in economic growth that could dampen the revenue-generating capacity of firms and even extend receivables settlement days, thereby weakening their liquidity position.

However, analysts at J.P. Morgan suggest that Nigerian firms further strengthen their working capital positions by paying workers and suppliers on time, accelerating collections from debtors, and holding more cash reserves.

“This puts businesses in a better position to take advantage of growth opportunities such as investing in new projects, expanding into new markets, or upgrading operations, and also to recover faster from market disruptions,” J.P. Morgan said in a recent note.

What does working capital management mean for investors?

Abioye of FBNQuest says the improved liquidity could boost investor confidence in Nigerian equities, particularly in consumer goods, energy, and financial services.

“If interest rates decline well enough next year, then firms will begin to deploy that excess cash properly into capex and expansion projects.”

“However, risks remain. Persistent FX volatility, potential global oil price shocks, and Nigeria’s still-high cost of borrowing could erode gains if not managed carefully,” he added.

“Stronger liquidity positions signal corporate resilience, improving investor confidence and the attractiveness of Nigerian firms. It tends to spur more buying interest in these stocks. Overall, it is positive for the productive sector of the economy,” Odubola added. (BusinessDay)