In the first part of this piece, we wrote about sectors that would offer investors the needed rest of mind at a time like this when the Nigerian economy is in recession.
Going into 2017, we expect investors to look towards quoted companies in the agric sector like Okomu Oil Palm, Presco and Livestock Feeds, among others; the building materials sector in view of the huge infrastructure need of the country and the fact that the Federal Government is planning to spend huge resources on capital projects. Add this to the fact that Lagos State, Nigeria’s economic capital and the West Africa’s fifth largest economy by GDP has earmarked a princely N500 billion for infrastructure projects in 2017. Champions in this sector include: Dangote Cement, Lafarge Africa and CCNN
We also urged investors to look towards operators in the transport and services industry as those wherein investors cannot get it wrong.
Oil and Gas Sector
With crude oil selling projected to hit $60 next year, it is not out of place to expect impressive top and bottom-lines for players in the upstream sub-sector of Nigeria’s Oil and Gas industry like Oando Plc and Seplat. These upstream industry players are also expected to benefit from the November 30, 2016 agreement by members of the Organisation of Petroleum Exporting countries (OPEC) to cut supply for the first time in the last decade, supported by key non-members as Russia as part of plans to shore up the price at the international market.
Since then, oil price have continued to rally, remaining between $52 and $55 per barrel. This is especially at a time non-OPEC members like Russia also agreed to cut output. The companies operating in the sector are posting strong numbers that will support dividend payment and price appreciation as the implementation of the supply cut kick off in the first quarter of 2017. The likely increase in crude prices and production output in the wake of ongoing discussion with Niger-Delta militants by the Federal Government in the coming year would significantly improve the working capital of industry operators.
The major implication of this is that many such operators can now service debts that have left them at the mercy of an unholy tripartite of banks, receiver/managers and the Asset Management Corporation of Nigeria (AMCON). They would also be able to discuss new credit lines for financing their businesses. We expect petroleum marketing companies to diversify, as has been done by Mobil Oil Nigeria Plc, while boosting profitability and income streams in the coming year.

Financial Sector/Banking
Financial sector reform through financial inclusion which is expected to further enhance economic growth and job creation through access to financial products and services by a large segment of the informal sector of the economy did not impact much on the banking as a result of the ongoing recession that has greatly affected savings. The sector, being the engine room for economic development and growth of any country, continues to survive in a volatile economy, despite the seeming overregulation by the Central Bank of Nigeria (CBN). The services of the banks have kept many in operation despite the excessive exposure to power, oil and gas sectors. But with the new flexible exchange rate that has boosted the financials of some banks, it is expected that a rise in crude oil will influence the numbers positively as repayment of the toxic loans which have been provided for before now will automatically return to bank books as profit for the good of shareholders and other stakeholders.
Some players in this sector have shown leadership, despite the recession and expected to pay even higher dividend that they did last year to their shareholders, going by their third quarter numbers, while others will cut payout while nothing is expect from the few with negative retain earnings.