By Helen Oji
The oil and gas sector on the Nigerian Exchange Limited (NGX) has emerged as the worst-performing index year-to-date (YTD), posting a 10.41 per cent loss, despite a combined profit before tax of N386.7 billion.
The profit was declared by four key players in their 2024 full-year results. The sector has so far emerged as the worst performer among five other major sectoral indices on the exchange.
This downturn presents a sharp reversal from the 24 per cent gain the sector recorded during the same period in 2024, raising fresh questions about the sustainability of earlier gains and the mounting challenges facing the industry.
Although Aradel, Conoil, MRS and Total Energies demonstrated strong earnings in the financial year that ended on December 31, investor sentiment has been largely negative, as share prices across the board have declined sharply.
Data from the Nigerian Exchange Limited (NGX) showed that Aradel began the year with a share price of N598, but at the close of transactions yesterday, the share price closed at N497, shedding 16.9 per cent YTD. Shareholders’ worries are compounded by the fact that Aradel has lost 7 per cent of the stock’s value from March 7th till date.
Similarly, Conoil, which reopened for transactions in January 2025 at a share price of N387.20 closed yesterday at N331.20, representing a decrease of 14.5 per cent. Conoil has lost 10 per cent of the stock’s value from March 7th till date.For MRS, its share price also dropped by 19.7 per cent YTD from N217.80 kobo to N174.90 kobo.
Findings revealed that while the oil and gas sector has demonstrated strong earnings potential, a combination of macroeconomic instability, regulatory uncertainty, and company-specific challenges has overshadowed its fundamentals, dragging the index into negative territory and raising fresh concerns about the sector’s near-term prospects.
Analysts said the sector’s outlook has also been clouded by continued economic uncertainties. According to them, despite the firms’ solid top-line figures, investor confidence remains fragile in the face of high inflation, rising interest rates, and persistent currency volatility.
The naira’s depreciation has weighed heavily on oil and gas companies, with many reporting significant foreign exchange losses due to the revaluation of foreign-denominated payables and borrowings.
These losses have, in some cases, offset revenue gains and raised concerns about the long-term sustainability of earnings. For instance, Aradel Holdings posted a net FX loss of N19.6 billion in 2024, occasioned by a realised FX loss of N28.9 billion, partially offset by a realised FX gain of N9.35 billion.
This marked a 133 per cent increase compared to the N8.386 billion FX loss recorded in 2023 – one of the highest year-on-year growth in FX-related losses.
According to independent investor, Amaechi Egbo, operational pressures are also weighing heavily on the sector.
He pointed out that rising distribution and operational costs, persistent supply chain disruptions, and erratic fuel pricing have all contributed to investor unease.
Additionally, he said uncertainty surrounding the federal government’s downstream deregulation stance, particularly delays in subsidy repayments and inconsistent messaging on fuel pricing, has further dampened confidence.
Egbo pointed out that limited liquidity within the oil and gas segment of the market has made it more vulnerable to volatility, adding that with only a handful of firms listed, shifts in investor interest can lead to outsized impacts on performance, amplifying the effects of already negative sentiment.
While the sector’s financials show resilience and strong bottom-line growth, the broader environment has made it difficult for investors to look beyond the risks.
As concerns about economic stability, forex pressures, and policy direction persist, the oil and gas index may continue to struggle to regain investor confidence in the short term.
