Economy
Dangote Sugar: Price Hikes Sweeten Earnings
By ARM Securities
Over 2016, Dangote Sugar Refinery Plc (DSR) reported an upsurge in earnings despite lingering pressures: currency weakness, elevated raw sugar prices and higher energy cost.
Solid earnings reflected the steep hike in refined sugar prices as well as volumes resilience hinged on the largely non-discretionary nature of DSR’s product.
In addition, the company improved its financial efficiency by refinancing its expensive debt with CBN’s concessionary borrowings which, together with support from higher revaluation gains on biological assets, capped an impressive year for the company. In view of this, the company raised its DPS to N0.60 (2015: N0.50).
Going forward, whilst we expect volumes to track lower as corporate institutional clients seek cheaper alternatives, revenue should maintain its upswing on the back of higher prices.
Aided by the impact of stronger naira (at the parallel market) on COGS, cheaper borrowings, as well as improved cash position, we expect earnings to rise for the second consecutive year in 2017.
Over 2016, DSR faced sizable input cost pressures as steep naira depreciation combined with bullish raw sugar prices (+40% YoY) to drive cost of raw materials nearly two-fold higher YoY. To add, energy cost surged as lower gas supply compelled the company to rely on increased utilisation of more expensive alternative (LPFO).
Furthermore, OPEX tracked higher (+12% YoY) following upswing in S&D cost which mirrored movement in PMS prices.
Faced with sizable input cost pressure, DSR responded by hiking refined sugar prices 68% YoY (9M 16: +36.3% YoY) to N10,900/50kg bag on average.
Though volume growth consequently suffered in the final quarter of the year (YoY: 9M 16: +16%, Q4 16: -33%), overall sales in the year was flat at 778.5KMT to leave DSR’s topline printing at a record high of N169.7 billion over FY 16
In a bid to minimize margin compression, DSR substituted its more expensive intercompany loan (interest rate at 13.5% per annum) with concessionary CBN financing (9% per annum). Aided by improved cash position, stemming from efficient working capital management, the company reported net finance income of N302 million vs. net interest charge of N653 million in FY 2015.
In addition, the company reported a more than two-fold YoY rise in fair value adjustments on biological asset reflecting improved yield and longer tenor life.
Consequently, mainly riding on pass-through from strong top-line growth, DSR reported its fastest earnings growth in four years.
Going forward, we expect the latest round of price hike to N17,000/50kg bag to keep average refined sugar prices 56% higher relative to 2016.
That said, amidst increasing desire for cheaper substitutes by DSR’s corporate institutional clients (30% of overall revenue) as well as potential cutback in indirect exports, on the back of recent naira gains at the parallel market, we expect some volume contraction in the current year (FY 17E: -13% YoY to 674KMT).
Nonetheless, largely reflecting higher prices, we project revenue growth of 34% over FY 17 to N227.6billion.
On cost, whilst higher raw sugar prices should ordinarily stoke COGS pressures, we are now more sanguine on input cost in view of increased gas supply and currency appreciation at the parallel market which we believe should temper pressures from global raw sugar prices.
Specifically, we project a 1.5pps YoY decline in COGSSales ratio to 85% with COGS at N193.5billion (+32% YoY). In addition, we think the company’s sizable cash position and debt refinancing bode positively for net finance income, which we project to climb 14% YoY. Overall, reflecting higher pricing and financial efficiency, we expect earnings to print at N16.3billion, which translates to 13% increase from FY 16 level.
DSR trades at a current P/E of 6.4x vs. 16.4x for Bloomberg Middle East & Africa peers. The stock has gained 0.16% YTD (Food: -7.3% YTD, NGSE: -4.6%) with last trading price of N6.12 at a 32% discount to our FVE of (N8.08). We have a BUY rating
Source: www.armsecurities.com.ng.
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By Adedapo Adesanya
The Senate has passed a bill to repeal and re-enact the law establishing the National Insurance Commission (NAICOM), paving the way for the regulatory agency to be renamed the Insurance Regulatory Commission (IRC).
The legislation, titled the Insurance Regulatory Commission (Establishment) Bill, 2026, was passed after the Senate considered and adopted the report of its committee on banking, insurance and other financial institutions.
The Chairman of the committee, Mr Adetokunbo Abiru, the senator representing Lagos East, who presented the report, stated that the proposed legislation was necessary because the existing National Insurance Commission Act of 1997 had become outdated and no longer reflected the realities of Nigeria’s evolving insurance industry or global regulatory standards.
According to the Senate, the decision to change the Commission’s name was informed by the need to eliminate confusion associated with the existing designation and to better reflect the institution’s regulatory mandate within Nigeria’s insurance industry.
The bill also provides legal protection for the commission and its officers against adverse claims arising from the lawful execution of their statutory duties.
However, he noted that the commission’s enabling law had become obsolete, exposing significant regulatory gaps that required urgent legislative intervention.
‘The current National Insurance Commission Act 1997 is outdated and does not adequately address the emerging economic growth, needs and development of the insurance business,” the lawmaker said.
He explained that the new legislation seeks to strengthen the independence of the commission by empowering it to make regulatory decisions without undue influence in the country’s insurance sector.
According to him, the bill also enhances the commission’s authority to exchange information and collaborate with domestic and international regulatory bodies, issue regulations, guidelines, standards and directives on insurance-related matters, and intervene more effectively in financially distressed insurance companies to protect policyholders and preserve financial stability.
This marks yet another move to strengthen the country’s insurance sector following the enactment of the Nigerian Insurance Industry Reform Act (NIIRA) of 2025 and the industry-wide recapitalisation exercise, which will wrap up by July 31.
By Adedapo Adesanya
About 143 companies that successfully passed the technical and prequalification stages of the Nigerian Upstream Petroleum Regulatory Commission’s (NUPRC) 2025 Licensing Round will, today, compete for 50 oil and gas blocks at the commercial bid conference in Abuja, the final stage in the allocation process for the assets.
The commission said only the prequalified companies have been invited to attend the event, which will hold at the Conference Centre of the Transcorp Hilton Hotel, Abuja, stressing that participation is strictly by invitation.
The commercial bid conference will determine the successful bidders for oil and gas assets located across Nigeria’s producing and frontier basins.
The 50 blocks comprise 16 onshore blocks and 18 shallow water blocks in the Niger Delta, one deep offshore block, three onshore blocks in the Benin Basin, four in the Anambra Basin, four in the Chad Basin, and four in the Benue Trough.
According to the commission, the winning bids will be determined through a transparent evaluation process based on clearly defined commercial parameters. These include the signature bonus offered by bidders, the proposed work programme commitment and the level of performance security provided. The final selection will be based on a weighted technical and commercial score.
The licensing round is being conducted under the provisions of the Petroleum Industry Act (PIA) 2021, which requires a transparent and competitive process for the award of petroleum assets.
NUPRC had announced the commencement of the 2025 Licensing Round on November 11, 2025, before opening the online bid portal on December 1, 2025, to enable interested companies to register and participate in the exercise.
To ensure prospective investors fully understood the requirements, the commission organised a pre-bid conference on January 14, 2026, at Eko Hotels and Suites, Lagos. The event provided detailed explanations on the licensing guidelines and bidding procedures to registered participants and other stakeholders.
Registration and submission of prequalification documents closed on February 27, 2026, while the prequalification evaluation was completed on March 16, 2026.
NUPRC disclosed that 286 companies initially submitted applications for prequalification.
Following the evaluation process, 196 companies were cleared to participate in the technical and commercial bid stages.
The prequalified 143 companies eventually submitted a total of 200 bids for the available oil and gas blocks. These companies are now set to compete at the commercial bid conference, where the financial offers will be opened and evaluated to determine the eventual winners.
The licensing round is expected to attract fresh investment into Nigeria’s upstream petroleum sector, boost exploration activities across both producing and frontier basins, increase crude oil and gas reserves, and support the country’s drive to grow production and government revenue.
It also underscores the regulator’s commitment to implementing a transparent, competitive and investor-friendly licensing regime under the Petroleum Industry Act.
By Adedapo Adesanya
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has retained all key monetary policy parameters following the conclusion of its two-day meeting on July 21, 2026, on Tuesday, maintaining its tight monetary policy stance to curb inflation and support macroeconomic stability.
According to the Governor of the apex bank, Mr Yemi Cardoso, who chaired the committee, the Monetary Policy Rate (MPR), which serves as the benchmark interest rate, remains at 26.50 per cent. The MPC also retained the asymmetric corridor around the MPR at +50 basis points and -450 basis points.
In addition, the Cash Reserve Ratio (CRR) for commercial banks was left unchanged at 45.00 per cent, while the CRR for merchant banks remains at 16.00 per cent. The committee also retained the CRR on non-Treasury Single Account (Non-TSA) public sector deposits at 75.00 per cent, with the liquidity ratio at 30.00 per cent.
The decision reflects the apex bank’s continued commitment to containing inflationary pressures through a restrictive monetary policy while safeguarding the resilience of Nigeria’s financial system amid ongoing macroeconomic adjustments.
By keeping all policy tools unchanged, the MPC signalled its intention to continue managing excess liquidity in the banking sector and maintain stability in financial markets.
The move is also expected to provide greater policy certainty for investors and businesses monitoring the country’s monetary policy direction.
The latest decision also means borrowing costs are likely to remain elevated in the near term as the central bank continues to prioritise price stability over monetary easing.
Analysts had expected the CBN committee to retain the rate after Nigeria’s headline inflation came in at 15.91 per cent as of June 2026, marking a slight decline from 15.93 per cent in May.
However, even as overall price growth has moderated significantly compared to previous periods, food inflation remains a persistent challenge, accelerating to 17.52 per cent in June.
