Russia’s invasion of Ukraine has led to a sharp rise in global oil prices amounting to more than 100 dollars per barrel. This development, without doubt, has posed high implications for the Nigerian economy as the largest oil-producing country in Africa. By extension, Africa will also feel the impact as its largest economy is affected.
Russia happened to be among the first three largest oil-producing countries in the world and the 11th largest economy globally, and by that, its impact is felt in the global market as one of the major actors that determine the global economy.
Its continuous onslaught on Ukraine has moved her contemporaries like the United States, the United Kingdom, etc. to place strict economic sanctions on the country and her citizen’s investments outside the shores of Russia.
However, the Nigerian stock market is gaining from the rise in crude oil prices, especially the oil and gas stocks listed in the Exchange which came tops among the indexes that measure different sectors on the Exchange.
State of oil and gas index in HY’2022
The Oil and Gas Index emerged as the best performing index with a gain of 58% during the half-year ended June 30, 2022.
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- The Nigerian All Share Index closed the first half of 2022 with a gain of about 21.17% year to date (YTD) making it one of the best-performing stock markets in the world.
- The equity trading recorded a gain of N5.639 trillion during the half-year ended June 30, 2022, as investors continue to increase their buying pressure, especially on blue-chip stocks.
- Positive sentiments had returned to the local bourse as the release of full-year 2021 and Q1’22 corporate earnings bolstered buying interests in dividend-paying stocks.
- According to data from the Nigerian Exchange Limited tracked by Nairametrics, the oil and gas index which measures the performance of the oil and gas firms quoted on the NGX grew by 58% or 200.33 basis points to close at 545.34 index point as against the opening index of 345.01 index points at the beginning of the year 2022 trading in January 4, 2022.
- The NGX oil and gas index comprises nine listed oil marketing and production companies – Ardova Plc, Conoil, Eterna, Japaul Gold and Venture, MRS Oil Nigeria, Oando, Seplat Energy, Total Nigeria and Capital Oil.
- NGX MERI growth index followed with a growth of 31.02% or 559.92 basis points to close at 2,364.94 index point from the opening figure of 1,085.02 in January.
- Financial analysts believed that the growth in the segment was spurred by gains in the share prices of Seplat Energy, Eterna, Conoil and Oando.
Further analysis of some of the companies’ performance YTD at June 30, 2022, showed that Seplat Energy recorded the highest gain of 100 per cent while Eterna Oil followed with a YTD growth of 40.59 per cent while MRS Oil gained 31.58 per cent as of June 30, 2022.
What analysts are saying
According to United Capital Plc, “our outlook for the sector remains moderate. In 2022, we expect a moderation in oil prices globally. Firstly, the oil and gas quota expected discontinuation will see production caps removed potentially or at least returned to pre-pandemic levels.
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It is projected that listed upstream oil and gas firms will continue to be profitable due to increased cost reduction initiatives.
The oil and gas industry’s growth and profitability are still dependent on operator pricing and quantity, Agusto & Co. has said.
The rating agency which stated this in a 2022 Oil & Gas Storage Industry Report said the decreased profit margins, idle or underused capacity, and constrained ability to pay operating and finance expenses could be countered by higher throughput revenue, product diversification plans and efficient downstream company operation.
The agency noted that the Nigerian Oil & Gas Storage Industry’s performance maintained an upward trajectory in the year 2021 driven by increasing demand for petroleum products.
“The growing demand for petroleum products is upheld by continued urbanisation in addition to the expansion of the domestic and international air travel industry.
“In the near term, Agusto & Co. expects petroleum products consumption to rally significantly as business activities improve, albeit below pre-pandemic levels.
“We believe that PMS could average about 21 billion litres in 2022 while AGO demand should also grow, contingent on advancements in the power sector. Ultimately, we believe the foregoing would culminate into higher demand for storage in 2022,” the agency noted.
Top 10 Indexes by gainers by percentage
- Oil and Gas index – 58.06%
- NGX MERI growth index – 31.02%
- NGX main board index – 30.11%
- NGX AFR DIV Yield index – 24.68%
- NGX Premium Index – 18.15%
- NGX Growth Index – 17.13%
- NGX Pension Index – 2,28%
- NGX 30 Index – 9.60%
- NGX Lotus Islamic Index – 8.03%
- NGX Industrial Index – 9.60%