Nigeria’s oil and gas sector is expected to sustain its positive performance in the current quarter, despite growing expectations of profit-taking following a powerful rally that has already driven the sector up by nearly 120% year-to-date.
Market analysts say investors are now closely monitoring whether the strong upward momentum can continue or whether the sector will enter a phase of consolidation after months of impressive gains.
Speaking to CNBC Africa, Amira Ada, Investment Research Analyst at ARM, explained that the sector’s strong performance has been supported by volatility in global crude oil prices, solid fundamentals among key upstream companies, and growing optimism around the anticipated listing of the Dangote Refinery.
According to her, Nigeria’s oil and gas stocks have benefited significantly from fluctuations in Brent crude, which rose as high as approximately $120 per barrel in the first quarter before stabilising around the $80 range. Market expectations are now centred on whether prices will remain between $80 and $90 in the coming months.
Ada noted that upstream oil companies remain highly sensitive to changes in crude prices, as revenue is directly influenced by global oil market movements. However, she stressed that even with potential price corrections, upstream players are still likely to benefit from relatively supportive market conditions compared to historical averages.
“The upstream guys are very sensitive to crude oil prices because any shock has a direct impact on revenue,” she said.
Despite concerns over the speed of the rally, which has seen the oil and gas index surge by about 119.7% year-to-date, Ada argued that the growth has been driven not only by market momentum but also by strong earnings performance and long-term expansion strategies among leading companies.
She highlighted firms such as Aradel and Seplat as key contributors to the sector’s resilience, noting that their performance reflects both improved revenue generation and strategic growth plans.
Focusing on Seplat, Ada pointed out the company’s balanced approach to shareholder returns and capital investment. She explained that Seplat has continued to reward investors through dividends while simultaneously funding expansion projects aimed at increasing production capacity.
The company recently declared an interim dividend of about 5 cents alongside a bonus payout, maintaining a consistent shareholder-friendly policy while targeting production of around 150,000 barrels per day by 2026.
“I don’t think this is something investors should fear,” she said, referring to concerns that dividend payments could limit reinvestment capacity.
Elsewhere in the market, attention has shifted to delayed financial disclosures and mixed performance in the downstream segment.
Ada acknowledged investor concerns surrounding Aradel’s delayed audited full-year 2025 results and first-quarter 2026 figures, noting that the company has indicated both reports will be released by the end of May.
In the downstream space, she described a mixed performance from companies such as TotalEnergies and Eterna, citing pressure on revenue and operating profit due to fluctuating crude prices and weaker fuel sales.
Higher crude oil costs during the quarter impacted PMS pricing and reduced market demand, while disruptions in supply further affected sales volumes. Lubricants also recorded weaker contributions, particularly for Eterna, adding additional pressure on revenue performance.
Despite these challenges, both companies reportedly maintained relatively stable profit-after-tax figures, suggesting improved cost control and margin management.
Looking ahead, analysts say investor sentiment could be further influenced by the expected listing of the Dangote Refinery, which is widely seen as a potential catalyst for Nigeria’s energy sector.
For now, the outlook suggests that while the pace of gains may moderate, fundamentals remain strong enough to support continued interest in the sector. However, investors are expected to become more selective as valuation concerns, global oil price movements, and corporate earnings updates shape market direction in the coming months.
