⛽ Crude Reality: Rising Oil Prices Could Fuel Bank & Energy Stocks
Based on Meristem Report – June 29, 2025
Global Oil Surge and Nigeria’s Market Pulse
As geopolitical tensions escalate in the Middle East, global oil prices are pushing higher — and according to Meristem Securities’ latest report, this rally could spell good news for select sectors of the Nigerian stock market.
The research highlights that oil exploration companies and banks stand to benefit the most from this global price momentum — provided Nigeria can overcome some domestic bottlenecks.
️ Energy Stocks Set to Reap the Rewards
Oil exploration companies with upstream operations are positioned to enjoy a direct earnings boost from higher crude prices.
Top Picks Identified:
• Seplat Energy Plc
• Geregu Power Plc
• Aradel Holdings Plc
✅ These companies benefit from:
• Direct exposure to crude oil sales
• Ability to scale quickly in rising-price environments
• Currency gain advantages due to FX-linked oil revenues
Takeaway: Crude price rally = potential earnings surprise for well-positioned oil plays.
Banks Riding the Interest Rate Wave
Interestingly, banks are also poised for a strong earnings stretch — not because of oil, but because of high interest rates and inflation.
Key Highlights:
• Elevated interest rates = higher net interest margins
• Banks can lend cautiously, yet still earn well on interest income
• Increased government borrowing offers low-risk investment avenues
Takeaway: Banks benefit from the inflation-interest rate mix, unlike real sector companies that may struggle with higher borrowing costs.
Real Sector Caution: Inflation May Bite
While oil and banking stocks look promising, Meristem cautions that other sectors could struggle under the weight of inflation and tight credit conditions.
Margins could shrink
Access to loans may become more restrictive
Consumer purchasing power remains under pressure
This makes non-oil and non-banking equities less attractive in the short term — especially consumer goods and industrials with thin margins.
Economic Implications: FX, Budget, and Stability
Rising crude prices also support the broader Nigerian economy in several ways:
• Improved FX inflows (since oil is Nigeria’s top FX earner)
• More government revenue, helping reduce budget deficits
• Greater FX market liquidity, leading to better exchange rate stability
However, there’s a caveat:
Nigeria’s crude production output remains below its budgeted target — a key risk that could limit the upside from higher oil prices.
⛽ Fuel Prices & Inflation Risks
With Nigeria’s fuel market now deregulated, international oil prices directly affect pump prices for petrol (PMS).
What this means:
• If oil prices keep rising, PMS prices will go up
• This will affect transportation costs and eventually food inflation
• Expect the CPI to feel pressure — especially in Q3
Fixed Income Corner: Still Attractive
Despite the optimism in equities, Meristem notes that:
• Sustained U.S. Fed rate hikes
• Ongoing domestic inflation pressures
… will continue to keep bond yields elevated, which is good for fixed-income investors. The Nigerian bond market remains attractive for those seeking safety and income.
Final Thoughts for Investors
Oil + Banks = Hot Watchlist: These sectors could outperform in Q3 if oil prices hold.
Real Sector = Stay Selective: Monitor earnings and margin pressures.
Macro Watch = FX & Inflation: Stay alert to policy actions, especially regarding production targets and monetary tightening.
Balance Your Exposure: Consider combining dividend-paying banks with oil exposure for a well-hedged strategy.
Based on Meristem Report – June 29, 2025
Global Oil Surge and Nigeria’s Market Pulse
As geopolitical tensions escalate in the Middle East, global oil prices are pushing higher — and according to Meristem Securities’ latest report, this rally could spell good news for select sectors of the Nigerian stock market.
The research highlights that oil exploration companies and banks stand to benefit the most from this global price momentum — provided Nigeria can overcome some domestic bottlenecks.
️ Energy Stocks Set to Reap the Rewards
Oil exploration companies with upstream operations are positioned to enjoy a direct earnings boost from higher crude prices.
Top Picks Identified:
• Seplat Energy Plc
• Geregu Power Plc
• Aradel Holdings Plc
✅ These companies benefit from:
• Direct exposure to crude oil sales
• Ability to scale quickly in rising-price environments
• Currency gain advantages due to FX-linked oil revenues
Takeaway: Crude price rally = potential earnings surprise for well-positioned oil plays.
Banks Riding the Interest Rate Wave
Interestingly, banks are also poised for a strong earnings stretch — not because of oil, but because of high interest rates and inflation.
Key Highlights:
• Elevated interest rates = higher net interest margins
• Banks can lend cautiously, yet still earn well on interest income
• Increased government borrowing offers low-risk investment avenues
Takeaway: Banks benefit from the inflation-interest rate mix, unlike real sector companies that may struggle with higher borrowing costs.
Real Sector Caution: Inflation May Bite
While oil and banking stocks look promising, Meristem cautions that other sectors could struggle under the weight of inflation and tight credit conditions.
Margins could shrink
Access to loans may become more restrictive
Consumer purchasing power remains under pressure
This makes non-oil and non-banking equities less attractive in the short term — especially consumer goods and industrials with thin margins.
Economic Implications: FX, Budget, and Stability
Rising crude prices also support the broader Nigerian economy in several ways:
• Improved FX inflows (since oil is Nigeria’s top FX earner)
• More government revenue, helping reduce budget deficits
• Greater FX market liquidity, leading to better exchange rate stability
However, there’s a caveat:
Nigeria’s crude production output remains below its budgeted target — a key risk that could limit the upside from higher oil prices.
⛽ Fuel Prices & Inflation Risks
With Nigeria’s fuel market now deregulated, international oil prices directly affect pump prices for petrol (PMS).
What this means:
• If oil prices keep rising, PMS prices will go up
• This will affect transportation costs and eventually food inflation
• Expect the CPI to feel pressure — especially in Q3
Fixed Income Corner: Still Attractive
Despite the optimism in equities, Meristem notes that:
• Sustained U.S. Fed rate hikes
• Ongoing domestic inflation pressures
… will continue to keep bond yields elevated, which is good for fixed-income investors. The Nigerian bond market remains attractive for those seeking safety and income.
Final Thoughts for Investors
Oil + Banks = Hot Watchlist: These sectors could outperform in Q3 if oil prices hold.
Real Sector = Stay Selective: Monitor earnings and margin pressures.
Macro Watch = FX & Inflation: Stay alert to policy actions, especially regarding production targets and monetary tightening.
Balance Your Exposure: Consider combining dividend-paying banks with oil exposure for a well-hedged strategy.