Following the Federal Government downstream sector deregulation, share price of companies listed in the Oil & Gas sector on The Nigerian Stock Exchange (NSE) received boost on investors surge demand.
Investors taking position in the Oil & Gas share impacted positively on NSE Oil & Gas index as it gained 5.12 per cent last week while its year-till-date stood at -4.91 per cent.
The government had announced decision to deregulate the sector in order to halt the scarcity of Premium Motor Spirit (PMS) in the country.
The Petroleum Products Pricing Regulatory Agency (PPPRA) had assured Nigerians that a new price band for PMS effective May 11, 2016 will not be above N145 per litre.
For the first time in 2016 financial year, Investors in the capital market reacted to shares in Oil & gas sector as Mobil Oil Nigeria, Total Nigeria and MRS Nigeria, among others recorded price appreciation last week except for MRS Oil Nigeria that dropped by N4.36 or 10 per cent to N40.47.
The share price of Mobil Oil Nigeria rose highest to N175 from N155.09, representing a growth of N19.91 or 10 per cent.
Total Nigeria Plc, another multinational company, share’s price gained N13.00 or eight per cent from N157 to N170 while Seplat Petroleum Development Company Ltd closed last week at N350, up N10 or three per cent from N340 it opened the prior week.
Forte Oil Plc and Conoil Plc share price recorded a growth of two per cent and 10 per cent from N219.92 and N17.27 to close at N225 and N19.06 respectively.
Others companies in the downstream sector are Oando Plc and Eterna Plc. The share price of Oando Plc appreciated by 16 per cent from N 4.55 to N 5.29 while Eterna gained N0.33 or 12 per cent to N .3.03 after the closing of market transaction last week.
Analysts at Vetiva Research, a Lagos based research firm, noted that an average Foreign Exchange (FX) demand for fuel imports account for about 30 per cent of weekly sales at the interbank market.
According to the company’s report, “our sense is that due to shortage of USD receipts, the Central Bank of Nigeria (CBN) (through commercial banks) may no longer be willing to continue fully funding fuel imports via the official window. The question we now ask is can autonomous sources sufficiently meet the significant FX demand for fuel imports?
“We are aware of the arrangement between majors and related upstream companies but anticipate that as other independents enter the market, the currency could come under pressure outside of the official window and expect the premium between both markets to further widen – we liken this to a pseudo-devaluation or possibly, the takeoff of a formal two-tier FX market.
“In our view, if FX availability had been the major hindrance in fuel importation up until this point, without a requisite adjustment in the current FX framework, it is unclear how this new structure will sufficiently eliminate fuel queues at retail stations across the country. Based on this, we expect the CBN to roll out new FX guidelines soon.
“For years, downstream majors had lobbied for the deregulation of the sector in a bid to rid themselves of huge subsidy receivables that had stifled profitability;” it explained.
The company noted that the liberalization of the sector would allow majors leverage economies of scale to dominate the fuel import market.
Also, ARM Securities stated that the move would provide stronger incentive for private investment in refining and distribution infrastructure.
“Under this competitive environment, players with scale advantages, good logistics network and crucially greater access to capital and FX like Total Nigeria are Mobil Oil Nigeria are our favoured picks among listed petroleum marketers,” the company added.
Comments are closed.