Uche Cecil Izuora
Nigeria’s oil and gas sector has been projected to maintain its positive momentum in the current quarter.
This is even as investors brace for some profit-taking after a powerful rally that has already pushed the sector up nearly 120 per percent year to date.
Speaking to CNBC Africa, Amira Ada, investment research analyst at ARM, said the sector’s strong run has been underpinned by crude oil price volatility, resilient fundamentals in key upstream players and optimism around the expected listing of Dangote refinery.
The outlook comes as investors assess the next phase for energy stocks after a quarter marked by sharp swings in global oil markets. Brent crude climbed as high as about $120 per barrel in the first quarter before later averaging around $80, with market participants now watching whether prices settle in an $80 to $90 range later in the quarter or into the second half of the year.
According to Ada, Nigerian upstream companies remain highly sensitive to changes in crude prices, given the direct impact of oil price shocks on revenue. Still, she said even if benchmark prices pull back from earlier highs, upstream operators are expected to continue benefiting from the broader pricing environment.
“As you rightly said, we saw an uptick in Q1, and with the whole price volatility in crude oil prices, that’s one of the major drivers that drove the oil and gas sector,” Ada said. “The upstream guys are very sensitive to crude oil prices because any shock to crude oil prices has an impact on their revenue.”
Her comments suggest that while the pace of gains could moderate, sector earnings may remain constructive so long as crude prices stay at relatively supportive levels by historical standards.
A key question for investors is whether the sector’s surge can be sustained after such a dramatic rerating. The oil and gas index has advanced about 119.7% so far this year, raising concerns over whether valuations still support further upside or whether the market is approaching a period of mean reversion.
Ada pointed to the fundamentals of leading upstream names, including Aradel and Seplat, arguing that the rally has not been driven solely by momentum but also by revenue strength and long-term expansion plans. In her view, these companies continue to offer growth potential beyond the immediate crude price cycle.
She said investors should focus not only on recent earnings performance but also on the companies’ strategic plans to expand production and deepen long-term value creation. That underlying strength, she said, has helped justify the sharp appreciation in their stock prices.
On Seplat in particular, Ada said the company has maintained a consistent approach to balancing shareholder returns with capital expenditure requirements. She noted that Seplat has a track record of returning value to investors through interim and bonus dividends, while still pursuing expansion initiatives.
The company declared an interim dividend of around 5 cents in the first quarter and also issued a bonus dividend, continuing a pattern seen in 2025, she said. That shareholder-friendly stance has raised questions in some quarters about whether generous cash returns could constrain the company’s acquisition strategy or spending plans.
Ada downplayed those concerns, saying Seplat appears to have built a framework for managing both objectives. The company is targeting production of around 150,000 barrels per day in 2026, and she said management has shown consistency in optimizing between shareholder payouts and investment in oil well expansion.
“I don’t think this is something that shareholders should or investors should actually fear in this stock,” she said.
Elsewhere in the market, attention is also turning to delayed corporate disclosures and softer downstream operating trends.
Ada acknowledged investor concern around Aradel’s delayed audited full-year 2025 results as well as its first-quarter 2026 numbers, though she noted that a statement had already indicated both releases are expected by the end of May. For now, investors are waiting for those filings to better assess the company’s latest earnings trajectory and whether its fundamentals continue to support elevated market expectations.
In the downstream segment, she described a mixed picture for TotalEnergies and Eterna. Both companies saw declines in key top-line and operating metrics, including revenue and operating profit, reflecting pressure in the first quarter as higher crude prices fed through to fuel costs and disrupted market conditions.
Ada said one of the major common factors affecting both companies was lower fuel sales. The spike in crude prices during the quarter affected PMS pricing, while supply disruptions in the market added further strain. That combination weighed on volumes and revenue generation.
Beyond PMS, she flagged lubricants as another area of weakness, particularly for Eterna, where a sharp reduction in contribution from that segment had a significant impact on revenue. Even so, she said both companies still posted relatively resilient bottom-line performances, with profit after tax coming in above the previous year.
That divergence between weaker revenue and stronger profit suggests some downstream operators may be preserving margins or benefiting from cost discipline despite softer sales conditions.
Looking ahead, market sentiment may also be shaped by the anticipated Dangote refinery listing, which analysts see as a potentially important catalyst for the broader sector. While details around timing remain closely watched, expectations for the listing have helped support investor interest in Nigeria’s energy space.
For now, ARM’s view suggests the sector enters the quarter with supportive tailwinds still intact, even if the extraordinary pace of gains begins to cool. Crude price movements, the release of delayed earnings, dividend sustainability and major market events such as the Dangote refinery listing are likely to determine whether the rally broadens further or gives way to selective consolidation.
After a stellar run, the message from analysts is that fundamentals still matter. In Nigeria’s oil and gas market, investors appear willing to stay constructive — but increasingly selective — as they weigh global oil volatility against company-specific execution and valuation discipline.