In a remarkable turn of events, the oil and gas index has displayed exceptional performance, surging by an impressive 125 per cent throughout the year, securing its position as the top-performing index. This optimistic trend is credited to a series of policy reforms initiated by President Bola Tinubu’s administration since May.
A pivotal move in discontinuing the costly fuel subsidy program, a long-standing burden on public finances, has reinvigorated interest in energy stocks on the Nigerian Exchange Group (NGX).
This decision not only enhanced market liquidity but also triggered positive momentum across various sectors.
Index Performance and Key Players:
Data from the Nigerian Exchange Limited indicates that the oil and gas index, representing the performance of quoted firms on the NGX, soared by 125.5 per cent to reach 1,043.06 index points by the end of the year. Major constituents include Conoil, Eterna, Japaul Gold and Venture, MRS Oil Nigeria, Oando, Seplat Energy, Total Nigeria, and Capital Oil.
The banking index on the NGX also witnessed significant gains, registering an increase of 114.89 per cent, closing the year at 897.20 index points. Analysts foresee the sector maintaining its positive trajectory, fueled by optimism, deregulation, liberalization, and anticipated major listings on the NGX.
Insights from Financial Analysts:
Managing Director of Crane Securities Limited, Mr. Mike Eze, expressed high expectations for the oil and gas sector in 2024. Deregulation efforts and an attractive investment environment are seen as catalysts for increased activity.
A noteworthy development to watch is the potential listing of the Nigerian National Petroleum Corporation (NNPC) on the NGX, with predictions pointing to an early listing in the first quarter of 2024.
The impending launch of Dangote Refinery adds to the sector’s appeal, signaling confidence in the Nigerian market and attracting substantial investment.
Mr. Olatunde Amolegbe, Managing Director of Arthur Steven Asset Management Limited, acknowledges the positive impact of deregulation on potential growth in investment inflows. While optimistic, he emphasizes the need to monitor rising costs and their impact on overall profitability.
Executive Vice Chairman of Hicap Securities Limited, Mr. David Adonri, anticipates a dominant performance in the 2024 equities market for the oil and gas sector. The commencement of domestic crude oil refining and the expected listing of Dangote Refinery are deemed significant milestones that will attract substantial investment and boost economic growth.
Analyst and Head of Research at FSL Securities Limited, Mr. Victor Chiazor, projects a surge in activity driven by increased investments from Dangote Refinery and the positive effects of subsidy removal.
The long-term benefits of regulatory changes are expected to promote market efficiency, attract foreign investment, and stimulate exploration and production activities.
Optimistic Outlook and Considerations:
Kasimu Garba Kurfi, Managing Director/CEO of APT Securities and Funds Limited, shares an optimistic outlook for the Nigerian oil and gas sector in 2024.
He emphasized the potential for capital gains and share appreciation, citing policy changes, Dangote Refinery’s impact, and favorable oil price forecasts as key drivers.
While acknowledging potential challenges, the sector remains an attractive opportunity for investors and stakeholders.
The confluence of promising factors positions the Nigerian oil and gas sector as a significant driver of capital gains and share appreciation in 2024. Investors are advised to carefully assess individual companies and risks, exercising cautious optimism for unlocking the sector’s full potential.
