Economy
Total Nigeria: Whistle Blowing on Solid First Quarter
By ARM Securities
In keeping with the rave in town, we beam our equity strategy searchlight on a leading Oil Marketing Company (OMC), Total Nigeria Plc. (Total), which is scheduled to report 1st quarter earnings in the last week of April.
Despite its striking FY 16 earnings, which was almost four-fold higher YoY with EPS at N43.58, Total’s share price has declined 9.7% YTD (post result release: – 3.7%)—underperforming the broader NSEASI.
In our view, the weak appetite for the stock was underpinned by the company’s disappointing final dividend announcement of only N7.00 which brought total DPS to N17.00, with the implied pay-out ratio of 39% well behind its average of 84% over the last decade.
That said, the stock is typically prone to big moves after earnings releases and can easily gap up if the numbers are as strong as expected.
For full-year ended 2016, revenue grew 39.9% YoY to N290.9billion, largely reflecting a 38% YoY increase in petrol sales. The jump in PMS turnover reflects higher prices (+42% YoY to an average of N123/litre) which neutered volume weakness. Elsewhere, sales of lubricants climbed 53% YoY as the company raised lubes prices even as NGN depreciation at the parallel market pulled back importation of lubes to create scope for market share expansion for domestic players.
Consequently, gross profit was 94% higher relative to prior year with corresponding margin jumping to a decade high of 16.9% (+4.7pps YoY).
The foregoing combined with efficient cost control (OPEX: +1.3% YoY) to drive a four-fold YoY expansion in earnings.
Total reported its highest gross margin on record of 24.2% (+12.2pps QoQ) in Q4 16 in line with those of its close rival (Forte Oil Plc).
In our view, the upsurge reflects price increases in lubes and deregulated product segments (LPG, AGO, DPK) which more than offset weaker petrol sales.
Irrespective, N9 billion in other expenses mainly due to N7.4billion in foreign exchange loss1 moderated the impact of its record gross margin to leave EPS at N9.32 (+17.3% QoQ and +147.9% YoY). Barring the impact of the FX loss, Q4 16 EPS would have printed at N36.00 (FY 16: +489.4% YoY to N70.26).
For Q1 17, we expect petrol volumes to head further south owing to higher prices and supply constraints.
Specifically, we forecast a 10% QoQ decline in petrol volumes to 373million litres. That said, as with Q4 16, higher prices across petrol (67% YoY to N145/litre), diesel (60% YoY to N234.5/litre), kerosene (40% YoY to N311.56/litre), and lubricants (+18% average) as well as resilient volumes in these segments (excluding petrol) guide our Q1 17E sales of N75.7billion (+27% YoY, +7% QoQ).
Consequently, our gross margin expectation for the quarter is 20.2% (+5.3pps YoY, -3.9pps QoQ).
Further down, the flat movement in the interbank market (N305/$) and appreciation at the parallel market (+20% to N390/$2), compared to prior quarter, should dispel foreign exchange losses in the period.
To be clear, we now see scope for FX gains on the Trade creditors line—pegged to the parallel market.
This possibility notwithstanding, we take the cautious approach of discounting potential currency induced gains. Irrespective, we expect strong underlying performance over Q1 17, with an EPS estimate of N17.04 (83% QoQ and 104% YoY) leaving prospect for an interim dividend payment.
Over FY 17, despite expected higher average petrol pump price of N145/litre (2016 average: N123/litre) as well hike in lubes prices, weaker petrol volumes should moderate total sales growth to 8.5% YoY (to N315.6billion).
On cost, notwithstanding recent NGN appreciation at the parallel market which should ordinarily moderate input cost, our average crude oil price (22% YoY to $55/bbl.) and NGN forecasts (18% to N360/$) should leave COGS at elevated levels.
Consequently, gross margin should come in 20bps lower YoY at 16.7%. Furtherdown, amidst the still elevated payables, second order impact of weaker naira underpins our expectation for FX loss of N6.4bilion over 2017.
The foregoing should combine with higher net finance charges (+24% YoY to N717million), reflecting absence of payment of accrued interest on delayed subsidy, to drive our FY 17 EPS to N39.8 (-9% YoY) with total dividend at N19.88 (50% pay-out).
Total has had a good run over the last one year and currently trades at a P/E of 6.2x relative to 12.9x for peers. Net adjustments to our models drive our FVE 8% higher to N384.72, which implies a 43% upside from last closing price. We retain a BUY rating on the stock.
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.
