From telecoms, banking and finance, oil and gas, petroleum exploration, stock market, manufacturing, fast-moving consumer goods segments to hotel and hospitality, infrastructure financing, maritime security, service sub-sectors to mention just a few; indeed, their fundamentals, in a manner of speaking, leaves so much to cheer about.
Telecoms
Riding on the back of a successful business year which saw Airtel closing many deals in 2022, the telco is continuing with its winning streak early on this year already as it announced the acquisition of 5G spectrum and an additional spectrum for its 4G network for a total sum of $316.7 million.
Expectedly, shares in Airtel Africa climbed 5.2 per cent to N1, 630 per unit last Monday after the news hit the market.
According to a statement by the local unit of Airtel Africa, the decision is part of its commitment to deepen higher-speed connectivity in Nigeria by way of 5G cellular technology.
The company said that it purchased 100 MHz of spectrum in the 3500MHz band and 2x5MHz of 2600MHz from the Nigeria Communications Commission (NCC), for a gross consideration of $316.7m, payable in the local currency.
The company seeks to gain the timely traction needed to earn itself a good place in the fifth-generation technology segment of Africa’s largest telecom market where two early birds secured operational licenses in 2021.
“The acquisition of 5G spectrum will underpin our growth strategy by enabling the launch of higher speed connectivity to enhance customer service and accelerate digitalisation for consumers, enterprises and the public sector,” the document said.
Airtel Nigeria gave up an early chance to run 5G technology in Nigeria when, in December 2021, big rival MTN Nigeria and Mafab Communications snapped up the two available permits at the premier auction arranged by the NCC.
While MTN teed off operations in August, Mafab sought a five-month extension due this month from the regulator for its own launch.
Nigeria is the biggest market of both Airtel Africa and the MTN Group (the parent company of MTN Nigeria).
Airtel Nigeria has assured the expansion drive will ease connectivity at a faster pace to enable improved customer service delivery and fast-track access to digitalisation for consumers, businesses and the public sector.
“Nigeria is a market with enormous potential for future growth in mobile services,” said Segun Ogunsanya, CEO of Airtel Africa.
“Investment in new technologies and local infrastructure to enable this growth is a strategic priority for the group and will ensure we are able to provide reliable and affordable services to local communities across the country,” he added.
Private refinery
The year is beginning on a very pleasant note for the Group with the formal commissioning of the much awaited Dangote Refinery by President Muhammadu Buhari in a matter of days.
Dangote Refinery by Aliko Dangote has the capacity to process about 650,000 barrels per day of crude oil, making it the largest single-train refinery in the world, could see the first refining runs begin as early March this year.
The integrated refinery and petrochemical complex in the Lekki Free Zone near Lagos, Nigeria, will produce Euro-V quality gasoline and diesel, as well as jet fuel and polypropylene and will likely generate 4,000 direct and 145,000 indirect jobs.
It is expected to double Nigeria’s refining capacity and help in meeting the increasing demand for refined petroleum products, while providing cost and foreign exchange savings. It is estimated to have an annual refining capacity of 10.4 million tonnes of petrol.
Other divisions of the Group, such as the multimillion-dollar sugar company, Dangote Sugar Refinery Plc (DSR), which raised the stakes in 2022 after increasing DSR Numan Sugar sub-sector capacity from 3,000 hectares of cane per day to 6,000tcd, 9800tcd and 15,000tcd has committed $ 700 million to invest in the backward integration programme.
Lekki Deep Seaport
If any investment can be described as really spectacular, then the Lekki Deep Seaport is it. For majority stakeholders of this investment, this year will pay off. This is because the Lekki Deep Seaport stood out as a game-changer in investment outlay considering its huge potential as a stream of income for the subnational and national government of Nigeria.
With a projected $361 billion which is roughly about N287 trillion to be realised from equity investment in Lekki Deep Seaport after liquidating loans acquired for the project, it is a good deal.
Besides, it is expected that the direct and induced business revenue impact is estimated at $158 billion, about N124.7 trillion, in addition to a qualitative impact on the manufacturing, trade, and commercial services sector.
It may be recalled that the engineering, procurement, and construction (EPC) contractor for Lekki Port, China Harbour Engineering LFTZ Enterprise (CHELE), a subsidiary of China Harbour Engineering Company, announced the completion of the construction works on the first phase of the $1.5 billion port last October.
During the formal unveiling of the project, the Chairman, Board of Directors, Lekki Port LFTZ Enterprise Limited (Lekki Port), Mr. Biodun Dabiri noted that about 170,000 jobs will be created.
MTN Nigeria
According to stock market analysts, MTN Nigeria is the next best thing that can happen to anybody this year if its fundamentals are anything to go by.
The shares which opened at N215 per share this year is expected to reach N313. 08 by year-end.
The company started the year at a share price of N185 and closed at about N215 representing a price-to-earnings ratio of 12.55x. At its peak last year, MTN sold for as high as N270/share
On paper, it will seem that the company’s current share price of around N215 per share is right about being valued appropriately if what you are factoring is its trailing earnings. But factor in MTN’s growth trajectory and the story might be somewhat different.
MTN Nigeria has a strong balance sheet, records of consistent growth in earnings, and impressive return on equity. The company is currently the 3rd most valuable stock on the stock market with a market capitalisation of 4.38 trillion, which is 15.7% of the entire Nigerian Stock Exchange equity market.
From available information, MTN Nigeria has built up an impressive earnings history. Over the past five years (2017-2021), earnings compounded annual growth rate (CAGR) stood at 38.5%. This means it has increased its profits by an average of 38.5% yearly for the last 5 years. For example, MTN’s revenue was N81 billion in 2017 compared to N298.6 billion in 2021.
In October, the telco recorded earnings on-year growth of 22.12% to N269.039 billion for the first nine months of 2022. This suggests it is already on track to surpass its 2021 performance.
In terms of returns, it recorded an outstanding return on equity of 142% compared to the industry’s 31.2%. However, its profits are almost five times its interest payments.
All in all, the outlook remains favorable for the company and this is because of the renewed strength in the third quarter which brightened the prospects for a full-year turnover expectation in the region of N2 trillion as data services steadily continue to lead revenue growth.
The company’s share price delivers a dividends yield of 6.59% (N14.17 DPS), which is higher than the bottom 25% of dividend payers in the NG market but low compared to the top 25% of dividend payers in the NG market (8.55%). The company’s dividend yield is forecast to reach 8.6% (N18.439 DPS) by December 31, 2023.
Banks soaring high
Despite a poor operating environment and terrible economic headwinds that adversely affected certain business ventures in the outgoing year, most of the Tier 1 banks had a bullish run in their year end as shown in their balance sheets and also looks good to do even better this year.
In the majority of the banks’ balance sheet and financial reports that formed this assessment based on their respective assets, liabilities, equity at the end of the accounting period, what stood them out is their consistency thus far.
Although in its assessment, the National Bureau of Statistics revealed that the banks generally recorded slowed growth, at 20.06 per and 25.5 percent recorded in the second quarter of 2022 and 2021, respectively, to 12.03 percent during the period under review, and which it said is the slowest quarterly growth since the first quarter of 2021 when the economy was recovering from the COVID-19 pandemic, there were a few who stood out of the pack.
Zenith Bank, First Bank, Access Bank, First Bank, FCMB, Fidelity Bank, Wema Bank
Zenith Bank is the Number One Bank in Nigeria by Tier-1 Capital with an asset base which rose from N6.347 trillion to N8.481 trillion last year, its audited financial statements showed. This year looks promising as according to the Group Managing Director/CEO of Zenith Bank Plc, Ebenezer Onyeagwu, the financial institution is poised for more exploits.
First Bank, First City Monument Bank (FCMB) and Fidelity Bank were also among the first three banks leading as the best-performing commercial banks in Nigeria in the Q3 of 2022.
This is just as Wema Bank Plc’s stocks emerged as the best-performing financial stocks on the Nigerian Exchange during the 2022 financial year.
According to the report, Wema Bank’s share price appreciated by a whopping 441.7 percent. The bank recorded a healthy 51% increase in gross earnings in the first nine months of 2022 and a 31% increase in post-tax profit. Investors rallied around the bank’s stocks despite a general downturn in most banking stocks during the year.
An analysis of the banks’ equity and financials revealed that they made a sum of N298.84 billion as profit before tax between July and September of 2022, showing an increase of 29.9 percent compared to N228.54 billion recorded the year before.
The banks remained strong despite solid headwinds, in which Nigeria’s GDP is slowing to 2.25 percent from 3.54 percent in the previous quarter and 4.03 per cent in the same quarter of 2021.
Besides, the banks witnessed a 5 per cent increase in customer deposits during the period under review to stand at N43.68 trillion as of September 2022 from N41.61 per cent as of June 2022. Four of the 13 banks recorded positive growth in their share price in the third quarter of this year in the local equities market.
Real estate
Like banks, another sector mostly poised for the big league this year is the real estate market. Interestingly, real estate experts have predicted some major factors that would influence the development of the real estate market in 2023 while citing inflation, general elections, soaring housing prices as some of the causative factors that would spur growth and sustain the economic drivers of the real estate sector in 2023.
One of these experts, Bismarck Rewane, CEO at Financial Derivative Company (FDC) projected a sustained growth driver for the real estate sector in 2023, noting that the real estate sector of the Nigeria economy will expand by 5.2 per cent in 2023.
According to Rewane, the sustained growth of the real estate sector would increase demand for real estate assets.
The FDC boss, noted that the sector’s contribution to GDP would increase by 6.5 per cent while contending that this growth would be sustained in the new year due to high population and urbanisation growth would be the major drivers of the trajectory in both short and long terms.
The expansion, according to Rewane, will happen on the back of the sector’s sustained growth, among other drivers.
The economic analyst noted that the ballooning population in urban cities would contribute to the development of the housing sector in 2023, adding that, the present challenge had been traced to Nigeria’s population growth which is currently at 2.6 per cent per annum and currently outpacing the provisional housing system in the country.
Also the Bank of Industry (BOI) in a report on Nigeria’s housing sector, affirmed that, “with a growing urban population, increasing construction costs, and declining household income and access to affordable housing is becoming more difficult for millions of citizens.”
The BOI, however, outlined some critical areas to be addressed to reposition the housing sector in Nigeria, stressing that adequate financial intervention in the housing value chain was required to boost development in the sector.
“Increased partnership with the organised private sector is crucial to unlocking opportunities in the real estate market,” the BOI report stated.
A report by the Federal Mortgage Bank of Nigeria titled “Institutional turnaround for the next level,” indicated that, although the federal government budgeted N470 billion for housing in 2022, the sector would require trillions of naira to close Nigeria’s housing gap.
The FMB report showed the estimation of 206 million persons in Nigeria, which about 95.1 million lived below the poverty line, and as such, it was difficult for them to have access to their own homes.
The executive director, Housing Development Advocacy Network, Festus Adebayo, noted that the housing sector in 2022 performed well solely for those at the top, particularly, in the areas of luxury homes and commercial real estate; however, it has failed in the area of providing affordable housing.
