NGX Oil & Gas Index Soars Amid Nigeria’s Fuel Price Hike

by Adenike Adeodun

In a remarkable financial development, the Nigerian Exchange Limited (NGX) Oil & Gas index has outperformed other indices on the bourse year-to-date (YtD). The NGX Oil & Gas index appreciated by 108.24 percent YTD to 963.05 basis points. This surge comes in the wake of price hikes in premium motor spirit (petrol), diesel, and other products, coupled with federal government reforms in the oil and gas sector.

Contrastingly, the NGX Alternative Securities Market (AseM) has not mirrored this success, witnessing a slight dip of 0.07% YtD, falling from 659.4 basis points at the start of 2023 to 658.99 basis points.

The surge in the NGX Oil & Gas index follows closely on the heels of the Nigerian government’s announcement of fuel subsidy removal, leading to a significant rise in the share prices of companies in the sector. According to the National Bureau of Statistics (NBS), as of September 2023, the average retail price for Premium Motor Spirit (PMS) hit N626.21, marking a steep 226.75% increase compared to the N191.65 recorded in September 2022.

Additionally, the average retail price for automotive gas oil, commonly known as diesel, rose by 12.77% on a year-on-year basis, from N789.90 per litre to N890.80 per litre.

Among the stocks contributing to the index’s growth, Seplat Energy’s share price closed on November 10, 2023, at N1,980.10 per share, registering an 80% increase from N1,100.00 at the beginning of the year. Similarly, MRS Oil Nigeria Plc’s stock price closed at N109.95 per share, soaring by 680% YtD from N14.10, and Conoil Plc closed at N86.5 per share, reflecting a 226% YtD increase from N26.5.

Eterna Plc and TotalEnergies Marketing Nigeria also saw significant gains, with Eterna climbing to N13.85 per share from N6.60 and TotalEnergies reaching N385 per share, a 99.5% YTD growth from N193.00 at the close of 2022.

In terms of profitability, Seplat Petroleum reported a substantial increase, generating a profit after tax of N46.93 billion in the nine months ending September 30, 2023, up from N33.86 billion in the same period of 2022. MRS Oil Nigeria also reported a robust profit of N3.44 billion in the same nine months of 2023, a significant leap from the N785.04 million reported in 2022.

According to a report by This Day Live, analysts attribute the strong performance of these stocks to the federal government’s reforms in the oil and gas sector. David Adnori, Vice President of Highcap Securities Limited, explained that the growth was driven by increased petroleum prices and a rebound in business activities post-Covid.

Cordros Research analysts predict that Nigeria’s oil and gas marketers will maintain positive revenue growth, driven by an anticipated increase in PMS prices and sustained local consumption of petroleum products.

This development in the NGX oil and gas sector underscores the profound impact of governmental policies on the stock market and the broader Nigerian economy, marking a pivotal moment in the nation’s economic trajectory.

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