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Meristem Tips Oil, Banking Stocks to Gain From Rising Crude Prices

Meristem Securities projects Nigerian oil and banking stocks to benefit from global crude surge, citing gains for Seplat, Aradel and commercial banks.

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Meristem Securities projects Nigerian oil and banking stocks to benefit from global crude surge, citing gains for Seplat, Aradel and commercial banks

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*Nigerian oil and banking stocks are expected to emerge as top gainers from the ongoing global surge in crude oil prices, according to Meristem Securities Limited.

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In its latest macroeconomic and capital market report, the investment firm noted that escalating geopolitical tensions in the Middle East have pushed oil prices higher, presenting short to medium-term opportunities for Nigerian upstream oil producers and commercial banks.

Meristem identified firms such as Seplat Energy Plc, Geregu Power Plc, and Aradel Holdings Plc as potential beneficiaries, with expectations of stronger earnings due to their exposure to higher crude prices and increased production incentives.

“Given the sustained rally in global crude oil prices, upstream oil companies are well positioned to deliver improved earnings,” the report stated.

It also highlighted that Nigerian banks could profit from the high interest rate environment, which boosts net interest margins and drives earnings. This trend is likely to maintain investor confidence in the banking sector despite inflationary challenges faced by real sector firms.

“Elevated inflation and interest rates are expected to weigh on real sector performance by pressuring margins and limiting access to credit,” Meristem noted.

“Conversely, banks are likely to benefit through improved net interest income, sustaining their positive earnings trajectory and attracting continued market attention.”

In addition to capital market impacts, the firm said that Nigeria’s foreign exchange earnings and government revenue could benefit from the crude price rally. A rise in dollar inflows from oil exports may help stabilise the naira and improve fiscal buffers.

“Crude oil remains the dominant source of Nigeria’s foreign exchange earnings,” the report observed. “A sustained rise in global oil prices could translate into higher FX inflows for the country, boosting liquidity in the official FX market and enhancing exchange rate stability.”

However, the report warned that Nigeria’s gains may be limited if crude oil production continues to fall below budget expectations. It also flagged inflationary risks, especially under the country’s deregulated fuel pricing system.

“A sharp rise in international crude prices would directly reflect in domestic PMS prices. This increase would feed into the transportation segment of the CPI and could spill over into food inflation,” the firm explained.

Meristem added that fixed income investors may also benefit from attractive yields, driven by persistent global rate hikes and local inflation concerns, particularly as US monetary tightening continues to influence sentiment.

Also read: NUPRC dismisses oil block licensing irregularity claims, assures transparency

Despite the mixed outlook, the firm concluded that investor interest will likely favour oil and banking equities, while sectors exposed to rising production costs and tighter credit conditions may struggle to maintain momentum.

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Theparkpay Technologies Limited Strengthens Global Payments Infrastructure with UK FCA Licence

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Theparkpay UK FCA licence strengthens the fintech’s global payments infrastructure as it expands regulated cross-border services across key markets (more…)

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Wale Tinubu Says Nigeria’s Creativity Can Drive Exports

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Wale Tinubu says Nigeria’s creativity can become a major export industry, creating jobs, attracting foreign exchange and building sustainable businesses (more…)

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TotalEnergies, AMNI Approve $800m Ima Gas Project

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TotalEnergies and Nigerian independent energy company AMNI International have taken the Final Investment Decision on the $800 million Ima Gas Project, more than five decades after the gas field was discovered.

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The Ima Gas Project, located in shallow waters across Oil Mining Leases 112 and 117 near Bonny Island, Rivers State, is expected to begin production in 2028 and reach a plateau of 350 million cubic feet of gas per day.

The development is expected to play a major role in supplying feed gas to Nigeria LNG, with the Ima field projected to provide about one-third of the additional gas required for the ongoing Train 7 expansion.

Train 7 is expected to increase Nigeria LNG’s liquefaction capacity from 22 million tonnes per annum to 30 million tonnes per annum, strengthening Nigeria’s capacity to process and export liquefied natural gas.

The Ima field was discovered in 1973 but remained undeveloped for more than 50 years. The Final Investment Decision provides the commercial and financial basis for finally developing the long-dormant resource.

Under the development plan, TotalEnergies will operate the project with a 40 per cent interest, while AMNI will hold the remaining 60 per cent.

The field will be developed using a single offshore platform connected to Nigeria LNG’s facility on Bonny Island through a 22-kilometre pipeline.

TotalEnergies said its investment in the project is more than $600 million, while the Federal Government described the overall Final Investment Decision as an $800 million investment.

At the FID signing ceremony in Abuja, TotalEnergies Exploration and Production Nigeria Managing Director, Mathieu Bouyer, described the decision as the culmination of a development process that had stretched across several decades.

He said the project reflected increased confidence in Nigeria’s investment environment and highlighted reforms targeting the non-associated gas sector as part of the factors that helped make the development commercially viable.

President Bola Tinubu welcomed the investment, saying the project demonstrated the potential of reforms introduced to reduce the cost and time required to develop oil and gas projects.

The President said the government had introduced incentives aimed specifically at unlocking onshore and shallow-water gas projects that had remained undeveloped for years.

He said the Ima development would create opportunities for Nigerian businesses, engineers, technicians and contractors, while generating jobs, economic activity in host communities and additional export earnings.

The project is also expected to have a strong Nigerian content component. TotalEnergies said all key contractors for the development would be Nigerian companies, while about 60 per cent of the workforce during the development phase is expected to come from host communities.

The development will incorporate measures aimed at reducing emissions. TotalEnergies said the platform would receive electricity from shore, operate without routine flaring and use permanent methane detection and monitoring systems.

The Federal Government said the project is part of efforts to turn Nigeria’s large natural gas reserves into productive assets capable of supporting industrialisation, energy supply, jobs and export earnings.

Special Adviser to the President on Energy, Olu Verheijen, said the Ima development illustrated the importance of creating commercial and investment conditions that allow previously stranded resources to be developed.

The government also noted that Nigerian financial institutions arranged 77 per cent of the project’s financing, further highlighting the participation of domestic financial institutions in the development.

For Nigeria LNG, the project comes as the company continues work on the Train 7 expansion, which is designed to increase the Bonny Island plant’s liquefaction capacity and strengthen the country’s position in the global LNG market.

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