Amid Products Price Hike, NGX Oil & Gas Emerges Best Performing Index

Kayode Tokede

Following price hike in Premium Motor Spriit (petrol), Diesel, among other products and federal government reforms in the oil & gas sector, the Nigerian Exchange Limited (NGX) Oil & Gas index with over 100 per cent gain outpaced other indices on the bourse Year-till-Date (YtD).   

Analysis of market activity revealed that the NGX Oil & Gas index appreciated by 108.24 per cent YtD to 963.05 basis points, while the NGX Alternative Securities Market (AseM) emerged the worst performing index, dropping by 0.07 per cent YtD from 659.4 basis points the stock market opened for 2023 to 658.99 basis points as of November 10, 2023. 

The performance of the NGX Oil & Gas index was boosted by investors reaction to government’s announcement of the removal of fuel subsidy, leading to a significant increase in the share prices of companies in the Oil & gas sector of the NGX.

The average retail price paid by consumers for PMS as of September 2023, according to National Bureau of Statistics (NBS) was at N626.21, indicating a 226.75 per cent Year-on-Year (YoY) increase when compared to N191.65 recorded in September 2022.

NBS also revealed that the average retail price of Automotive Gas Oil or Diesel paid by consumers increased by 12.77 per cent on a YoY basis from a lower cost of N789.90 per litre recorded in the corresponding month of last year to a higher cost of N890.80 per litre in September 2023.

The reforms in the oil & gas sector reflected on stock prices and corporate earnings of listed petroleum marketing companies on the exchange amid foreign exchange losses. 

According to THISDAY investigation, the stock price of Seplat Energy closed November 10, 2023 at N1, 980.10 per share, gaining 80 per cent YtD from N1,100.00 per share it opened for trading this year.

The stock price of MRS Oil Nigeria Plc closed trading November 10, 2023 at N109.95 per share, gaining 680 per cent YtD from N14.10 per share, while Conoil Plc closed November 10, 2023 at N86.5 per share, an increase of 226 per cent YtD growth from N26.5 per share the stock opened this year for trading.

Eterna Plc increased to N13.85 per share from N6.60 per share as Totalenergies Marketing Nigeria hit N385 per share, representing 99.5 per cent YTD growth from N193.00 per share it closed for trading in 2022.

On profit accrual, Seplat Petroleum generated N46.93billion profit after tax in nine months ended September 30, 2023 from N33.86 billion reported in nine months of 2022, while MRS Oil Nigeria declared N3.44 billion in nine months of 2023 from N785.04 million reported in nine months of 2022.  

Analysts have attributed hike in these companies stock prices to federal government reforms in the oil & gas sector, urging investors to take position in companies with fundamental.

Speaking, the Vice President, Highcap Securities Limited, Mr. David Adnori, told THISDAY that the growth in the period under review was driven by increase in petroleum price, stressing that increasing business activities, also a driving factor

 According to him, “The crude oil price per barrel in the global commodity market was low in 2020 and it affected the price of petrol. The federal government was reliant on increasing the price of petrol at some time.  Investors also compensated these companies considering their stock price appreciating in 10 months of 2023.

“In Q1 2022, business activities were improving post-Covid and there was movement restriction that people were not travelling. In 2023, we saw the ease of movement improved activities in the transport, commercial and manufacturing sectors. The growth recorded in revenue by these companies has a lot to do with improvement in business activities than the hike in price of petroleum products.”

Also, analysts at Cordros Research said: “In our view, Nigeria’s oil and gas marketers will maintain another year of positive revenue growth, driven specifically by; a possible increase in PMS prices, following our expectations of a partial stoppage of PMS subsidy in June and a sustained heavy local consumption of petroleum products.”

According to them, “FG unable to fully deregulate the downstream oil and gas sector following   protests by labour unions, it has continued to incur expensive subsidy payments through NNPC under-recovery costs. For 2023FY, we estimate the subsidy cost will settle at c. N3.69 trillion – H1-2023: N2.88 trillion; H2-2023: N810.00 billion.”

On his part, the Chief Operating Officer of InvestData Consulting Limited, Mr Ambrose Omordion , attributed the increase in revenue of these companies to higher-margin in crude oil products, stressing that the ease of movement also contributed to revenue and profit.

According to him, “These companies reported an increase in revenue due to higher margin in products the sale this year. The restriction of movement eroded their revenue last year but with the ease on COVID-19 lockdown, they were able to grow revenue that translates into profit.”

NAICOM: Insurance Sector Will Realise N1tn Premium Income Dream in 2023

Ebere Nwoji

The National Insurance Commission (NAICOM), has said that the insurance sector will realise the tall dream of hitting the N1 trillion premium income mark by the close of business this year.

Also, the commission said it would commence its 10-year insurance sector transformation agenda with the reintroduction of the hitherto jettisoned Risk Based Capital increase model in 2024.

NAICOM further said it has commenced moves for the implementation of its zero tolerance to unpaid claims regulatory model in the industry through a prevailing order to insurance firms to publish all outstanding claims in their books to the insuring public inviting them to come up with all necessary documents for immediate settlement of such claims.

The commission said these were highlights of the recent insurers’ committee meeting, the last for the year between the regulatory body and all insurance chief executive officers in the country.

Disclosing these to the media at the close of the meeting, NAICOM’s Head of Corporate Communications and Market Development, Rasaaq Salami, along with other members of the Publicity Sub Committee of the Insurers Committee quoted the Commissioner for Insurance, Mr Sunday Olorundare Thomas, as saying that going by its performance in the past three years, the insurance sector this year did well in terms of growth.

“We have moved far ahead from where we were to a greater height. In 2021, we had a gross Premium of 620 billion, and in 2022, we had 720 billion, in the first half of 2023, we had 551billion and with third quarter report we have already exceeded the annual premium of last year and currently looking at what we have, we have already exceeded the annual premium of last year. This means that by the end of this year, we might just be hitting the almighty N1trillion we have been talking about and base on that assessment we think the industry has performed well not just on gross premium income (GPI), but on claims payment. Also we have seen a lot of improvement in that regard,” Salami said.

He said the Risk Base Supervision model was part of the commission’s transformation agenda and is already being implemented by the commission.

He however said its capital increase model tagged, “Risk Base Capital,” might commence in 2024 but said that the risk based capital could not be without the full commencement of the Risk Base supervision.

Also speaking, Chairperson, Publicity Subcommittee of the Insurers Committee, Mrs Ebelechukwu Nwachukwu, said the main point of the meeting was the explanation of the industry’s transformation road map by the insurance commissioner.

According to her, the commissioner at the meeting x-rayed the seven pillars of the industry’s road map, highlighting them as increased awareness, enhanced market conduct, insurer partnerships with telecommunications and non-insurance channels, improvement on digitalisation and the deepening of the talent pool within the insurance sector.

She spoke on the regulator’s stand on outstanding claims saying NAICOM had mandated operators through their umbrella body the Nigeria Insurers Association (NIA) to publish information on outstanding claims to the public inviting all insured who have unpaid claims to approach their insurance companies with requisite documents for the settlement of such claims.

Salami explained that NAICOM wanted the insurers to do the needed publication within two weeks after which the commission would thoroughly examine reactions, “and if there were no reasonable turn out in terms of members of public with unpaid claims approaching their insurance firms, the commission would on its own publish another notice to this effect after which it would close chapter on that.”

“NAICOM has mandated the Nigerian Insurers Association (NIA) to publish details on outstanding claims in prominent newspapers. This initiative aims at facilitating policyholders to claim their settlements.

“The NIA is given a two-week timeline to execute the publication, with a three-month monitoring period to assess improvements. If progress is lacking after three months, regulatory action may be taken”, Salami explained.

Continuing he said, “Report from insurance companies is that some of these outstanding claims, is not as if the companies are not really ready to pay, but the policy holders, some of them have not come up with the appropriate documentation to conclude on this process. And that is why we gave this directive from the insurance committee that it should be done.”