Tough time for Nigerian companies as customers buy mostly on credit

Nigerian companies are facing a cash crunch which confirms how financially stretched Nigerians are becoming.

Although they are making more sales, Nigeria’s largest listed companies have seen their net cash flow from operating activities reduced to N577.95 billion in March 2022.

This represents a 29.98 percent drop when compared to the N825.52 billion net cash flow stood as at March 2021.

Cash is the lifeblood of any business and the drop indicates that customers are owing, and the consequence is that the companies will have to borrow more to fund their expansion plans.

This is because if a company is experiencing a positive cash flow, it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, pay for expenses, reinvest in the business, endure recession and finally pay dividend to shareholders.

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A breakdown of the cash position by sector shows the cumulative net cash flow from operations of the largest consumer goods firms reduced by 75.04 percent to N51.12 billion in March 2022 from N204.84 billion the previous year.

The laggards were Nestle Nigeria, Four Mills, Nigerian Breweries, and Honeywell, who posted negative net cash flow from operations of N10.01 billion, N28.89 billion, Nigerian Breweries, N3.90 billion, and N553.03 million, respectively.

The average industry cash margin reduced to 12.18 percent in the period under review from 21.91 percent the previous year.

The dominant players in the cement sector: BUA Cement, and Lafarge Africa saw their combined net cash flow dip by 32.64 percent to N248.60 billion as at March 2022.

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