Once the pride of Nigeria's capital markets and a reliable driver of government revenue and foreign exchange earnings, the country's oil and gas sector has become an underperformer on the Nigerian Exchange (NGX). Currently, investor sentiment has turned decisively against listed energy companies, exposing deep-seated structural issues and demanding urgent reforms to regain investor confidence.
Despite relatively stable global oil prices, averaging around $85 a barrel for most of this year, Nigerian oil and gas stocks have struggled to reflect this optimism. According to data compiled by BusinessDay, as of the end of September 2025, the NGX Oil & Gas Index declined 9.8 per cent year-on-year, in sharp contrast to the 37.1 per cent gain in the broader All-Share Index (ASI). In comparison, the banking index is up 38.9 percent, and consumer goods are up 93.9 percent, making oil and gas one of the worst performers of the year.
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Within the oil and gas sub-index, individual company performance has been uneven. Eterna PLC was the only standout with a 14.8 percent rise, boosted by a return to profitability. In contrast, Conoil PLC declined 45.5 percent, Ondo PLC declined 25.8 percent, Seplet Energy declined 5.6 percent, Aradel Holdings declined 6.4 percent, and TotalEnergies Marketing Nigeria declined 8.3 percent.
“Better security, tackling crude oil theft and pipeline vandalism will stabilize production and boost export revenues. Fuel pricing stability, a clear, transparent framework post subsidies will help marketers manage margins and plan operations.”
Behind these figures are complex challenges that go beyond individual firms. For downstream marketers, the entry of the Dangote refinery is already changing supply dynamics, putting pressure on margins and increasing competitive risks. According to US-based capital markets analyst Nathan Olaniyi, “The rise of the Dangote refinery has reshaped valuations and squeezed marketers like TotalEnergies and ConOil, making the stocks less attractive.”
The company's earnings for the first half of 2025 paint a mixed picture. Eterna Plc recorded a net income of N573.8 million, up from a loss of N4.8 billion last year. However, low margins and limited scale remain a concern.
Conoil's profit declined to N900 million in the first half of 2024 from N8.02 billion. Finance costs doubled to N4.76 billion, squeezing margins and sending investor confidence into freefall.
Similarly, Ondo Plc declared half-year profit of N63.3 billion, barely higher than N62.7 billion in 2024. But the staggering loss of N49.7 billion Q2 spooked investors.
Aradel Holdings showed strong growth with a profit of N146.4 billion, up from N104.4 billion last year. Yet its share price is still down, underscoring how broader regional sentiment is weighing on earnings performance.
The story is the same for most companies: Strong profits don't necessarily translate into higher stock prices. Investors are indicating concerns over deeper issues, higher borrowing costs, policy uncertainty and forex volatility.
Until recently, Nigeria's record-high interest rates, peaking at 27.5 percent before a modest cut to 27 percent by the Central Bank in September, blocked access to affordable credit and pushed up finance costs. For many downstream players, this meant that their operating profits were increasingly spent on debt repayment.
The case of Conoil is instructive. Its growing debt burden doubled financing costs, squeezing bottom lines. Ondo and TotalEnergies faced similar pressures, worsened by a volatile FX market, which squeezed import margins and increased the cost of imported petroleum products.
Upstream firms were also not spared. Although Seplet and Airadel earn in dollars, FX translation losses caused by the highly volatile Naira have reduced their earnings. Persistent foreign exchange shortages and inconsistent monetary policy remain significant risks for investors.
The inability to convert Nigeria's oil wealth into stable investor returns lies at the heart of the problem. Crude oil production remains erratic, recently reaching 1.68 million barrels per day (bpd) in the second quarter of 2025, still below Nigeria's OPEC quota of 1.8 million bpd.
Production profits are constantly threatened by crude oil theft, pipeline vandalism and years of underinvestment. The Petroleum Industry Act (PIA) promised to fix this by streamlining regulation and attracting capital. Nevertheless, implementation has been sluggish, with international oil companies continuing to divest onshore assets due to security and regulatory concerns.
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Analysts also blame the frequent delisting of oil companies like Ardova and MRS Oil for reducing options for investors and weakening the visibility of the sector. “Investors do not trust the stability and predictability of the sector,” Olaniyi explained. “There is no clear approach on pricing, regulation or margins.”
As oil and gas stocks decline, investors are turning to more stable sectors. Banks have benefited from higher interest rates as net interest margins have increased, even if profit growth has slowed. On the other hand, consumer goods companies have successfully overcome inflationary pressure on consumers, maintained profitability and earned the favor of investors.
Addressing investor apathy in the oil and gas sector will require bold, sustained reforms, such as fully implementing the PIA. Rapid reforms could restore investor confidence and unlock long-term investment, particularly in upstream and midstream operations.
Better security, tackling crude oil theft and pipeline vandalism will stabilize production and boost export revenues. Fuel pricing stability, a clear, transparent framework after subsidies, will help marketers manage margins and plan operations.
FX Liquidity – A consistent, market-driven FX arrangement is essential for both upstream dollar-reporting firms and downstream importers. Monetary easing – Continued reduction in interest rates will reduce finance costs and reduce the debt burden on energy companies.
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While oil remains Nigeria's fiscal lifeline, its equity market relevance is fast eroding. Without reforms, oil and gas stocks will remain unattractive to both local and foreign investors. As one portfolio manager rightly said, “Oil still pays Nigeria's bills, but in the stock market, it is paying lower dividends.”
