Nigerian Oil and Banking Stocks Poised to Benefit from Rising Global Crude Prices

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Meristem Securities Limited has projected that Nigerian oil and banking stocks will benefit from the ongoing surge in global crude oil prices driven by geopolitical tensions in the Middle East. According to Meristem’s latest macroeconomic and capital market update, upstream oil companies and commercial banks are likely to emerge as key beneficiaries.

*lKey Beneficiaries

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The report identified companies such as Seplat Energy Plc, Geregu Power Plc, and Aradel Holdings Plc as likely to record improved earnings in the near term, owing to their upstream exposure and ability to capitalize on higher crude prices. “At the same time, elevated inflation and interest rates are expected to weigh on real sector performance by pressuring margins and limiting access to credit,” the report stated.

Impact on Nigeria’s Economy

Meristem noted that the current oil market dynamics could support Nigeria’s foreign exchange earnings and boost government revenue, thereby enhancing exchange rate stability and improving fiscal sustainability in the short to medium term. “Given that crude oil remains the dominant source of Nigeria’s foreign exchange earnings, a sustained rise in global oil prices could translate into higher FX inflows for the country,” the firm said

Potential Risks

However, the report warned that the benefits of higher oil prices could be undermined by Nigeria’s persistent underperformance in crude oil production, which remains below budgeted targets. It also cautioned that inflationary pressures may intensify due to Nigeria’s deregulated fuel pricing regime. “A sharp rise in international crude prices would directly reflect in domestic PMS prices,” Meristem added.

Investment Outlook

In the bond market, the report stated that sustained global interest rate hikes may keep yields attractive in the Nigerian fixed-income space, thus retaining investor interest. The firm concluded that while the outlook remains mixed, investor sentiment is expected to tilt towards oil and banking stocks, while real sector equities may face reduced momentum amid inflationary and credit headwinds.

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