Investment firm Meristem Securities Limited has projected that Nigerian oil and banking stocks will benefit from the ongoing surge in global crude oil prices driven by geopolitical tensions in the Middle East.

According to Meristem’s latest macroeconomic and capital market update, the rising oil prices could have implications for Nigeria’s economy and financial markets, with upstream oil companies and commercial banks emerging as key beneficiaries.

The report identified companies such as Seplat Energy Plc, Geregu Power Plc, and Aradel Holdings Plc as likely to record improved earnings in the near term, owing to their upstream exposure and ability to capitalise on higher crude prices.

“At the same time, elevated inflation and interest rates are expected to weigh on real sector performance by pressuring margins and limiting access to credit. Conversely, banks are likely to benefit from the higher rate environment through improved net interest income, sustaining their positive earnings trajectory and attracting continued market attention,” the report stated.

Meristem further noted that the current oil market dynamics could also support Nigeria’s foreign exchange earnings and boost government revenue, thereby enhancing exchange rate stability and improving fiscal sustainability in the short to medium term.

“Given that crude oil remains the dominant source of Nigeria’s foreign exchange earnings, a sustained rise in global oil prices could translate into higher FX inflows for the country. This, in turn, would enhance exchange rate stability prospects, particularly if supported by improved capital flows by boosting liquidity levels in the official FX market,” the firm said.

However, the report warned that the benefits of higher oil prices could be undermined by Nigeria’s persistent underperformance in crude oil production, which remains below budgeted targets. It also cautioned that inflationary pressures may intensify due to Nigeria’s deregulated fuel pricing regime.

“A sharp rise in international crude prices would directly reflect in domestic PMS prices. This increase would feed into the transportation segment of the CPI and could spill over into food inflation, given the elevated cost of moving agricultural produce and consumer goods to market,” Meristem added.

In the bond market, the report stated that sustained global interest rate hikes, particularly by the US Federal Reserve alongside domestic inflation concerns, may keep yields attractive in the Nigerian fixed-income space, thus retaining investor interest.

The firm concluded that while the outlook remains mixed, investor sentiment is expected to tilt towards oil and banking stocks, while real sector equities may face reduced momentum amid inflationary and credit headwinds.