Stocks of Nigeria’s major oil marketing companies have seen increased BUY activities lately, particularly since last week’s announcement of subsidy removal by President Bola Ahmed Tinubu.
Tinubu started quickly by warming himself to investors after wasting no time in announcing an end to the country’s costly fuel subsidy programme and unveiling plans to adopt a single exchange rate.
In the trading week ended June 2, the stock market rose by 5.37percent driven majorly by ten companies, three being major oil marketing companies like Conoil Plc, Eterna Plc, and MRS Oil Nigeria Plc.
Lagos-based Vetiva analysts said investors remained interested in the oil and gas sector, particularly due to ongoing discussions regarding the removal of the fuel subsidy. “Notably, the oil marketing space witnessed bullish trading …contributing to the sector’s positive performance,” the analysts added.
“We believe these pronouncements have a positive impact on Nigeria’s fiscal balance; an ambivalent impact on GDP growth; upward pressure on consumer prices and interest rates; and a double-edged impact on exchange rates. On one hand, this will also spur investments in both the upstream and downstream sectors over the medium term, as crude production for domestic refining is not subject to OPEC quota,” Vetiva analysts said in their June 5 note.
They expect the market direction to be largely influenced by the economic policies of the new government.
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As the market enters the final month of second-quarter (Q2) of 2023, investors are expected to continue to respond to major take away from the inauguration of President Tinubu.
In a 4-day trading week to June 2, share price of a major oil marketer, Conoil increased from N47.95 to N69.90, rising by N21.95 or 45.78percent. Year-to-date (YtD), Conoil has risen by 163.8percent.
Also, in one week, Eterna Plc increased from N7 to N9.25, rising by N2.25 or 32.14 percent. Year-to-date (YtD), Eterna is up by 38.3percent.
Another major oil marketing company, MRS Oil Nigeria Plc saw its share price up from N44.85 to N49.30, rising by N8.50 or 20.83percent in on week. This year, the stock has risen by 249.6percent.
“We expect the positive sentiments in the market to persist this week, hinged on investors’ expectations of positive corporate performance across companies on the back of anticipated favourable market policies by the new administration,” Meristem research analysts said in their June 5 note to investors.
The analysts who do not expect funds to flow from the equities market to the fixed-income markets this week, however, did not rule out the possibility of profit-taking activities on some tickers prices that are currently above their set target price.
As at June 2, NGX Oil & Gas Index was the second best performing with return of 34.62percent year-to-date, following NGX Consumer Goods Index (+43.77percent).
This year, Oando Plc has risen by 50.5percent, Total (+44.2percent), while Ardova is the only laggard this year (-6 percent).
The Nigerian Exchange Limited (NGX) All-Share Index (ASI) and its equities Market Capitalisation – decreased slightly by 0.02percent or N8billion on Monday June 5, its first dip since recent rally, from preceding days’ 55,820.50 points and N30.395 trillion respectively to 55,801.32 points and N30.387trillion.