Economy
Is Nigerian Equities Market Overvalued?
By Afrinvest Research
Given the challenges faced between H2:2014 and Q1:2017, investors constantly punished Nigerian equities, with sell-offs recorded across various sectors of the market.
Consequently, Nigerian equities were undervalued, in comparison to peers, presenting ample opportunities for investors to take advantage of some of the companies, which turned out impressive results despite the economic challenges.
Following the reforms in the FX market which resulted in increased FX liquidity and a restoration of investor confidence, massive gains were recorded in the market in 2017 and this has been sustained into 2018, up 12.2% (12/01/2018).
With the market now at an all-time high in terms of market capitalisation and the NSE All Share Index at a 9-year high, there are justifiable fears of overvaluation of the market which raises concerns with regards to a near term correction.
Our approach is to diagnose and probe into the fundamentals as well as technical merit of the overvaluation hypothesis.
From our analysis, average Trailing P/E and P/BV for the Nigerian equities market in the last one month as at 17/01/2018 stood at 13.1x and 1.7x, which are lower than 15.1x and 2.0x respectively for the MSCI Frontier markets index.
Looking back to the last 2-year bull market run Nigeria experienced between 2012 and 2013, the Nigerian equities market was priced at a premium to frontier markets peers in the late cycle of the run, as shown in the average P/E and P/BV multiples of the MSCI Frontier Markets index of 12.5x and 1.6x in 2013 relative to 13.5x and 2.2x of the Nigerian market in the same period.
This implies that despite the rally in the market in 2017 and early trading in 2018, current undervaluation of the Nigerian market by valuation multiples and the proven historical valuation premium Nigerian market enjoys in period of boom suggest there are more miles to clock in the market rally.
Hence, against the backdrop of improving macroeconomic conditions as well as positive outlook for corporate earnings, we believe there is a compelling case for investors to sustain interest in the Nigerian equities market as already noticed in the YTD return of 17.4% (17/01/2018).
Our Scenario Analysis in 2018
A review of our market forecast for 2017, shows that actual performance outperformed our bull case scenario, in which we projected that a contraction in the spread between the official and parallel market rates, an increase in oil production to about 2.2mb/d, oil prices between $55/b to $60/b and MPR at 14.0% will result in a 15.6% appreciation in the benchmark index.
Actual performance for 2017 (+42.3%) surpassed our forecast as investor confidence was reinvigorated following the reforms in the FX market and resilient earnings. In 2018, we envisage that market performance will be largely determined by the following factors:
- Earnings fundamental of Corporates;
- Stability in the FX market and other macro indicators; and
- Funds flow dynamics to emerging and frontier markets.
Our analysis of market trend over the past 10 years, makes a case for a possible repetition of history.
As noticed in 2012 and 2013, the periods following the global economic crisis, sentiment in the local bourse strengthened which drove the ASI 35.4% and 47.2% northwards in the respective years.
In a similar situation, as the economy rebounded from the slump – 2014 to 2016 – in 2017, we expect market sentiment to wax stronger in 2018.
In our scenario analysis for the market performance in 2018, we employed a blend of relative valuation in which we benchmarked our market valuation against multiples for peers in the MSCI Frontier market index and absolute valuation based on price forecasts for our coverage universe which is about 86.0% of the entire market.
From our analysis, the Nigerian market has outperformed the MSCI index on the basis of EPS, growing at a CAGR of 12.2% between 2010 and 2017 vs. a 2.1% decline for the MSCI index in the same period.
Similarly, on a P/E basis, the Nigerian market has commanded higher pricing over the MSCI index in 6 of the 8 years under review.
Against this backdrop, we carried out scenario analysis for the performance of the All Share Index in 2018.
Our forecast for the performance of the benchmark index in 2018 is largely positive as our scenarios (bear, base, bull) all signal appreciation in the benchmark index.
On a relative valuation basis, we noted earlier that our expectations for corporate earnings in 2018 is largely optimistic on the back of improving conditions in the operating environment; hence, we assumed an EPS of N3,377.4 as our base case scenario which implies a 13.0% increase from a trailing EPS of N2,988.8 in the prior year.
Our EPS projection was based on the 7-year EPS CAGR for the All Share Index to arrive at the forecast.
For our P/E projection, we compared current pricing in the Nigerian markets against peers for which the MSCI Frontier Markets index was employed.
In order to arrive at our p/e forecast of 14.1x in the base case scenario, we analysed historical P/E multiple of the ASI relative to the MSCI Frontier Index P/E and assumed a 1.0x premium in line with historical valuation spread.
This methodology yielded an All Share Index projection of 47,620.71 points in our base case scenario, which suggests a 24.5% appreciation in the year.
On an absolute valuation basis, we have a more conservative forecast for market performance, albeit still positive.
Based on our 12-month target prices from our coverage universe of stocks – about 86.0% of market cap – relative to 2017 yearend prices, we forecast a 5.6% jump in market capitalisation, implying ASI projection of 40,384.81 points.
Finally, to make a call on market performance for 2018, we adopted a blend of both valuation methodologies. Based on the foregoing, we arrived at an ASI projection of 45,811.73 points for 2018 which is a 19.8% appreciation from 38,243.19 points in 2017.
Our bear case (+7.7% to 41,189.9 points) and bull case (+32.7% to 50,749.10 points) also follow the same trend and further buttress the consensus view of positive market performance in 2018.
Whilst we note that developments in the macro space will also determine overall market performance, we opine that barring any major shocks in the FX market, corporate fundamentals will be a key determinant of overall performance.
By Adedapo Adesanya
The Senate Committee on Banking, Insurance and Other Financial Institutions has called for stronger collaboration among financial sector regulators and other stakeholders to strengthen Nigeria’s financial system and support sustainable economic growth.
The committee made the call during an expanded stakeholders’ engagement in Lagos, attended by the leadership of the Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Corporation (NDIC), Asset Management Corporation of Nigeria (AMCON), National Insurance Commission (NAICOM) and Nigeria Export-Import Bank (NEXIM), among other industry stakeholders and financial experts.
Chairman of the committee, Mr Adetokunbo Abiru (Lagos East), who was represented by Mr Osita Izunaso (Imo West), said stronger legislative reforms and regulatory collaboration were necessary to reposition Nigeria’s financial architecture for long-term economic prosperity.
Mr Abiru said the financial sector remained critical to investment, job creation, business expansion and macroeconomic stability, stressing that its ability to mobilise savings, channel credit to productive sectors, facilitate investment and manage risks was fundamental to sustainable economic growth.
He said the current economic realities required closer collaboration between the legislature and financial regulators, noting that challenges confronting the sector were interconnected and could not be effectively addressed through isolated interventions.
The lawmaker identified inflationary pressures, global economic uncertainties, cybersecurity threats, low insurance penetration and the need to diversify Nigeria’s export base as some of the challenges requiring coordinated policy responses.
He said the engagement was aimed at generating practical solutions to strengthen the country’s financial architecture and support sustainable economic growth.
According to him, monetary policy, financial safety nets, banking institutions, the insurance industry and export finance were interdependent components of a stable financial system and must therefore be strengthened collectively.
The Commissioner for Insurance and Chief Executive Officer of the National Insurance Commission (NAICOM), Mr Olusegun Ayo Omosehin, said the Nigeria Insurance Industry Reform Act (NIIRA) 2025 had contributed significantly to stabilising and repositioning the insurance sector.
Mr Omosehin disclosed that 43 insurance companies had successfully recapitalised, describing the development as a major milestone for the industry.
He commended Abiru and members of the committee for their role in advancing insurance sector reforms and urged the House of Representatives to expedite action on the relevant insurance reform bill to enable it to receive presidential assent and become operational.
Representatives of the CBN Governor and the Managing Directors of AMCON, NEXIM and NDIC also commended the Senate committee for its oversight and legislative support, saying its interventions had strengthened the agencies’ capacity to discharge their statutory mandates.
The engagement, held under the theme, Strengthening Financial System Architecture for Sustainable Economic Growth and Stability in Nigeria, also featured presentations by Professor Uche Uwaleke, President of Capital Market Academics of Nigeria (CMAN); Professor Biodun Adedipe, Chief Consultant, B. Adedipe Associates Limited; and Dr Tilewa Adebajo, Chief Executive Officer of CFG Advisory.
The experts presented policy recommendations on key issues affecting Nigeria’s financial system, with emphasis on financial stability, investment and sustainable economic growth.
Mr Abiru said the Senate would continue to engage financial regulators and other stakeholders to deepen financial inclusion, strengthen public confidence in financial institutions and improve regulatory effectiveness.
He said the broader objective was to position Nigeria’s financial system to compete more effectively in the global economy while remaining resilient and responsive to the country’s economic transformation agenda.
By Aduragbemi Omiyale
The first six months of 2026 were not too good for Caverton Offshore Support Group Plc, as it suffered an N8.7 billion loss compared with the N2.1 billion net profit it recorded in the same period of 2025.
This occurred as the company posted a 10.91 per cent decline in earnings between January and June 2026, according to its financial statements for the period ended June 30, 2026.
Analysis of the results showed that the revenue generated in the period under review stood at N14.7 billion versus the N16.5 billion printed in the corresponding period of last year.
Business Post observed that the revenue was negatively impacted by a decline in earnings from helicopter charter and helicopter/airplane contract.
Further analysis of the financial results indicated that operating profit went down by 22.34 per cent to N7.3 billion from N9.4 billion, with administrative expenses jumping to N7.9 billion from N4.7 billion.
But Caverton believes things will get better, noting that the clearest driver of the recovery is Caverton Marine.
Through its relationship with Stena Bulk, one of the world’s leading tanker operators, the organisation now participates in three Suezmax tankers trading a rare source of foreign-currency revenue for a Nigerian-listed company.
It noted that the relationship is being deepened through Unity Shipping Worldwide, a joint venture with the Nigerian National Petroleum Company (NNPC) Limited and Stena Bulk that pairs the state-owned oil firm’s national position and Stena Bulk’s fleet with Caverton’s indigenous operating platform
Closer to home, the firm’s OMIBUS platform, developed with Shanghai-based electric-propulsion OEM Explomar, is bringing battery-electric passenger ferries to Lagos waterways. A prototype is already in service, and Caverton holds a firm order from Lagos State for ten vessels, an early-mover position in clean inland-water transport that the group believes can be replicated across other states as the fleet enters service and ferry operations mature into steady, recurring revenue.
In aviation, the institution said the recovery is anchored on its partnership with NHV, a Belgium-based international helicopter operator, with the restructuring of charter operations targeted for the second half of 2026.
“The first half of the year tested us, but the direction of travel is now visible in the numbers.
“Quarter on quarter, we are working to build up our revenue to narrow losses. Our marine business units, from international tankers to electric ferries, are scaling.
“Meanwhile, our aviation relaunch is on track for the second half, and our cost base is tighter than it has been in years. There is distance still to travel, but Caverton is moving from stabilisation to recovery, and we intend to finish 2026 with that momentum intact,” the chief executive of Caverton, Mr Olabode Makanjuola, stated.
By Adedapo Adesanya
The Nigeria Revenue Service (NRS) and the Joint Revenue Board (JRB) have issued new guidelines clarifying the taxation of virtual assets in Nigeria.
The guidelines provide an administrative framework for the taxation of virtual assets and specify the tax obligations of individuals and businesses operating in the sector.
According to a public notice issued by the two agencies, the framework covers registration, reporting and record-keeping requirements, valuation principles and the tax treatment of virtual asset transactions.
It applies to taxpayers, Virtual Asset Service Providers (VASPs), peer-to-peer (P2P) marketplace operators, tax practitioners and other persons engaged in virtual asset-related activities.
The NRS and JRB said the guidelines were developed in line with the provisions of the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025.
The two bodies said the release was aimed at providing clarity, certainty and consistency in the administration of Nigeria’s tax laws as the country’s virtual asset ecosystem continues to evolve.
The agencies added that the framework would promote voluntary compliance, enhance transparency and support the development of a fair and efficient tax system for digital asset transactions.
They urged all affected taxpayers and stakeholders to familiarise themselves with the guidelines and ensure compliance with the applicable tax obligations.
The guidelines are available on the official websites of the two agencies.
