2023: Nigerian Banks, Others To Maintain Growth Trajectory Through Core Income-Analysts
This was made known by Cordros Securities Limited in its report titled; ‘Nigeria in 2023; Charting Through a Pervasive Slowdown’.
The report identified Financial Sector, Industrial Goods, Agricultural, Consumer Goods and Oil and Gas sectors to be the drivers of stock market performance in the year under review.
It added that, “for 2023 full year, we believe Nigerian banks will maintain their growth trajectory supported by core income, owing to higher loans and investment securities yields. Although, we think banks will be cautious about growing loans domestically in 2023 full year as the tight monetary conditions will likely limit risk asset creation.
“On the external front, Moody’s downgraded nine Nigerian bank’s long-term ratings based on the weakening in the Nigerian government’s fiscal capacity to support the country’s banks, and interlinkages between the sovereign’s weakened creditworthiness and the banks’ balance sheets, given the banks’ significant holdings of sovereign debt securities.
“Although, we expect non-core income to support earnings in 2023 full year, albeit marginal, as the price sharing and glitch on the e-banking platforms will continue to impact the performance.”
Cordros Securities said: “we believe this will negatively impact Nigerian banks looking to raise debt externally.”
On the Industrial Goods sector, the research firm said: “we envisage solid growth in revenue for firms under our radar on the back of higher prices of cement and leverage of exportation strategy.
“On the flip side, we highlight that the higher inflationary environment will continue to pressure the operational activities of firms in the industry. Consequently, we believe companies that can maintain operational efficiency and optimise plants to enhance fixed cost absorption will be better placed to deliver decent earnings in 2023.”
The firm further said, despite the challenging operating landscape, factors such as CPO, import restrictions amid current FX liquidity challenges and long-term sector growth prospects remain favourable for Agricultural sector players.
“Thus, we remain optimistic about Okomu Oil and Presco. For Okomu Oil, though we do not expect a significant increase in its maturities, we believe the upgrade of the milling capacity at the Okomu II plantation will cause an improvement in its production efficiency and in turn, its volumes, while for Presco, we expect the producer to deliver revenue expansion supported by improved volumes,” it stressed.
On Consumer Goods sector, Cordros Securities expected the agro-allied and the brewery sub-sectors will lead the next growth phase, saying, “accordingly, we see scope for earnings growth for Agro-allied names; Flour Mills Nigeria, AASCON Allied Industries and Dangote Sugar Refinery given the inelastic demand facing their products and the ability to implement more significant price increases than peers.
“On Oil & Gas (Downstream)sector, we expect the price cap on PMS to remain in place, though we acknowledge the possibility of a hike in the product’s price. We expect the NNPC to remain the sole supplier of the market, pending the potential commissioning of the Dangote Refinery in 2023.”
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