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

In its latest macroeconomic and capital market update, Meristem stated that the upward trend in oil prices could carry significant implications for Nigeria’s economy, with upstream oil companies and commercial banks identified as key beneficiaries.

The report listed Seplat Energy Plc, Geregu Power Plc, and Aradel Holdings Plc among companies likely to see improved earnings in the near term, citing their upstream exposure and capacity to leverage higher crude prices.

“While rising inflation and interest rates may continue to strain the real sector by compressing profit margins and limiting access to credit, banks are poised to benefit,” the report noted. “The current rate environment supports improved net interest income, helping banks sustain earnings and investor interest.”

Meristem also highlighted the broader macroeconomic impact, noting that sustained higher oil prices could bolster Nigeria’s foreign exchange reserves and government revenue, enhancing fiscal stability and exchange rate prospects in the short to medium term.

“Given that crude oil remains Nigeria’s primary source of FX earnings, increased global prices could lead to stronger FX inflows, particularly if accompanied by better capital flow management and improved liquidity in the official FX window,” it added.

However, the report flagged persistent underperformance in crude oil production as a major risk. Despite high prices, Nigeria continues to produce below budgeted targets—a factor that could limit the potential windfall.

It also warned of potential inflationary consequences under Nigeria’s deregulated fuel pricing regime. A spike in international oil prices, it said, would likely reflect in domestic petrol pump prices, feeding into transportation costs and potentially triggering a rise in food inflation.

On the bond market outlook, Meristem noted that ongoing global interest rate hikes—especially from the U.S. Federal Reserve—coupled with local inflation concerns, are likely to keep yields attractive in Nigeria’s fixed-income space, sustaining investor appetite.

Overall, while the outlook remains mixed, Meristem expects investor sentiment to shift towards oil and banking stocks, with real sector equities likely to face subdued performance due to inflation and tight credit conditions.