Investors in oil and gas firms listed on the main and premium boards of the nation’s equities market recorded about N187.446 billion gain during the first seven months of year 2021.
Checks by New Telegraph revealed that the oil and gas sub-sector gained N187.446 billion or 41.11 per cent to close at N643.369 billion in market capitalisation on July 31, in contrast to opening figure of N455.923 billion at the beginning of trading on January 2.
Market watchers believe the investors are taking position on oil and gas stocks due to ease of lock down, which has increased spending on transportation. The consequences of COVID- 19 outbreak had threatened the resilient outlook for Nigeria’s economy mainly supported by the oil and gas sector.
Speaking on the outlook for the rest of the sector, David Adonri, Managing Director/CEO, Highcap Securities Limited, said: “If the results and dividends announced by major companies are impressive, and if the rally in crude oil price is sustained, and if yield on debt does not go higher, demand for equities may increase and stem the tide of decline.”
On his part, Ayodeji Ebo, Senior Economist/Head, Research & Strategy, Greenwich Merchant Bank, said: “Rising fixed income yields will continue to suppress the performance of the equities market, however, influx of impressive financial performance and corporate actions will reduce the impact.
“Investors will cherry pick stocks with good fundamentals. However, as full year corporate actions releases wind down, we expect the equities market to dip presenting new entry opportunities.”
According to analysts at Cordros Capital, “for the rest of the year, we expect the current price cap on PMS will remain in place, as we struggle to see how the FG will be able to convince the labour unions on the need to eliminate subsidies, amid the weak macro conditions completely.
“Also, as stated in our downto stream oil & gas sector report, we do not think the FG’s proposed solution of adopting Compressed Natural Gas (CNG) engines will be feasible, given the high cost of engine conversion and the unavailability of sufficient auto gas stations in the country.
“On demand, we expect the resumption of full economic activities to continue supporting product demand. Specifically, we envisage improved demand from the manufacturing and transport sectors.
For supply, we expect individual product sourcing to remain challenging for downstream players as structural issues such as FX illiquidity persist.
SOURCE: newtelegraphng.com