Nigeria’s oil and gas sector, once the heartbeat of government revenue and foreign exchange, is losing its shine on the Nigerian Exchange (NGX). Despite resilient global crude prices averaging $65 per barrel this year, investors have turned their backs on energy equities, leaving the sector lagging behind other industries.
Sector under pressure
The NGX Oil and Gas Index has shed 9.8 percent year-to-date, even as the All-Share Index surged 37.1 percent. The contrast with other sectors is striking: the Banking Index is up 38.9 percent, while Consumer Goods nearly doubled with a 93.9 percent gain.
Analysts say the divergence reflects not only company-level struggles but also structural challenges unique to Nigeria’s petroleum market.
Winners and losers emerge
Eterna Plc stands out as the lone gainer, rising 14.8 percent on improved profitability. In sharp contrast, Conoil Plc collapsed 45.5 percent, weighed down by spiralling finance costs, while Oando Plc slid 25.8 percent amid volatile earnings.
Upstream majors also disappointed. Seplat Energy dropped 5.6 percent, Aradel Holdings lost 6.4 percent, and TotalEnergies Marketing Nigeria dipped 8.3 percent. The sector’s underperformance has exposed a deeper crisis of confidence.
Profits tell half the story
Eterna’s turnaround—netting N573.8 million in H1 2025 after years of losses—fuelled its rally. Yet investors remain wary of its small margins. Meanwhile, Conoil’s half-year profit plunged to N900 million, its weakest in five years, as finance costs more than doubled.
Oando’s headline profit of N63.3 billion masked a bruising N49.7 billion Q2 loss, rattling investor sentiment. Even Aradel, with profit rising to N146.4 billion, could not escape the sector-wide sell-off.
The numbers reveal a paradox: strong results do not automatically translate into investor rewards when confidence in the sector is weak.
Rising rates and squeezed margins
Until recently, the Central Bank’s record-high benchmark rate fuelled soaring borrowing costs. Downstream players saw finance charges balloon, wiping out earnings gains. Conoil’s H1 2025 results captured this pain vividly, with finance costs doubling to N4.76 billion.
Analysts argue that high debt servicing continues to erode shareholder value, deepening scepticism around the sector.
Structural cracks run deep
Nigeria’s oil industry faces persistent issues: crude theft, pipeline vandalism, and chronic underinvestment that routinely cap production below OPEC quotas. Although output rebounded to 1.68 million barrels per day in Q2 2025, the improvement has yet to restore investor confidence.
At the same time, subsidy reforms have exposed marketers to consumer resistance, while FX volatility continues to pressure both upstream and downstream firms. With Ardova and MRS Oil already delisted, investor choice is shrinking.
Investors rotate to safer plays
Faced with these risks, investors are moving into sectors with clearer earnings visibility. Banks, buoyed by interest margins, and FMCGs, protected by pricing power, have become the safe havens of 2025.
“There’s no compelling reason to overweight oil and gas in Nigeria right now,” a Lagos-based equity analyst told newsmen. “The fundamentals look weaker compared with banks or consumer goods.”
Policy drag and weak sentiment
The Petroleum Industry Act (PIA) was designed to transform the sector, but slow implementation and divestments by international oil companies have dampened hopes.
The Dangote Refinery offers potential relief by reducing fuel imports and stabilising margins, while pipeline security efforts could lift production. Still, until FX liquidity improves and policy execution becomes more consistent, oil and gas stocks may remain under the shadow of doubt.
As one portfolio manager put it: “Oil still pays Nigeria’s bills, but in the equity market, it pays fewer dividends.”
