Analysts at Vetiva Research said the ongoing digital transformation and recapitalisation in the banking sector will affect the sector’s operational efficiency, liquidity and risk absorption capacity in the years ahead.

In its report, ‘Nigeria Equity Strategy, Conviction Stocks for 2025’, the firm noted that the adoption of digital technologies would streamline banking processes, reduce operational costs and improve customer experiences. It said the recapitalisation policy is designed to strengthen the capital base of banks, ensuring they can better withstand economic shocks.

“Together, these initiatives are anticipated to bolster the overall resilience and competitiveness of Nigeria’s banking sector, positioning it for sustainable growth and improved financial stability as well as sustained earnings growth across core banking operations, especially in the first half of 2025,” the report said.

It expressed optimism about the prospects of the Nigerian equity market in the year, projecting sustained positive performance. This optimism is largely attributed to the active participation of local investors, who have continued to show resilience and confidence in the market despite global economic uncertainties.

Factors such as improved domestic liquidity, favourable policy adjustments and the growing influence of institutional and retail investors are expected to be key drivers of this upward trajectory, it noted.

“Local investors, buoyed by attractive valuations and returns are likely to remain the backbone of the market’s growth, solidifying their role as a crucial pillar of market stability and progress.

“In 2025, we remain optimistic about the growth prospects in the oil and gas sector following a push from the fiscal side to revive the industry. For the telecoms sector, we anticipate a recovery in EPS for players, following moves to mitigate against foreign exchange volatility, and the potential for a tariff hike by the NCC.

“We are optimistic about the banking sector, supported by attractive valuations for our top picks, with an average P/E of 1.7x compared to Nigeria’s markets P/E of 6.2x, as well as favourable macroeconomic conditions like elevated interest rates, and the potential for balance sheet expansion.

“Our portfolio comprises fundamentally sound companies operating in key sectors (telecoms, banking, consumer goods, industrials and oil and gas), with particular attention given to dividend-paying stocks,” the report said.