Life comes at you fast in Nigeria. Or are the natural laws of order accelerated here?
Take the oil and gas sector, for example. Oil and gas companies and countries are making more money than they’ve made in decades. For most, it’s more than they’ve ever made, period. In Q2, Shell made over $11 billion in profits, its best quarter ever, and Oman is set to record an annual budget surplus worth 6.5% of its total gross domestic product (GDP). But Nigeria is the exception.
A few months ago, I wrote an article titled “Why investors are bullish on Seplat” based on the company’s Q1 financial performance. In Q1 2022, Seplat recorded a 58.6% increase in revenues and a 130% increase in operating profit, with $35 million profit before tax, more than triple Q1 2021 numbers. This performance was driven by high prices despite the company’s lower production volumes in Q1 2022 due to oil theft. Seplat was flying high on the Nigerian stock exchange with a share price of ₦1,290, up 98% from Q1 2021. The verdict from investors and analysts was “buy, buy, buy”, and we were all bullish (ps: this is not investment advice).
Two quarters later, I’ll be the first to admit that my article did not age well. Even though oil and gas prices are still high, Seplat recorded a net loss of about $10 million. Worse still, its credit rating has been downgraded by Moody’s, an international credit rating agency. This sends a clear signal to investors and analysts: “sell, sell, sell”. One minute, you’re the darling of the NGX, and the next, investors are dumping your shares faster than you can say, “Seplat!” Indeed, the stock market is a fairweather friend. So, what went wrong?
Today, we will explore