Nigeria’s equity valuations signal pockets of optimism

… but warning signs persist

A comparative analysis of Nigerian publicly listed firms reveals a sharp divergence in valuations, with sectors such as cement, infrastructure, and agro-processing commanding premium multiples, while others like oil and gas and consumer staples languish under compressed enterprise value-to-EBITDA (EV/EBITDA) ratios.

BusinessDay plots the EV/EBITDA multiples of 12 listed Nigerian firms to highlight the shifting investor sentiment amid macroeconomic turbulence, FX reforms, and tightening consumer demand. Ranging from 2.8x for Seplat to 7.4x for Okomu Oil Palm, the spread in valuation provides insight into where market participants see resilience, risk, or revenue headroom.

Winners and valuation premiums

Okomu Oil Palm Plc, one of Nigeria’s largest palm oil producers, tops the chart at 7.4x, reflecting investors’ appetite for agri-businesses with high export exposure and dollar-denominated revenue streams.

According to CardinalStone estimates, the company’s profit after tax is forecast to climb 29.2 percent year-on-year to N51.6 billion down from N39.95 billion in 2024, underscoring Okomu’s strong fundamentals despite external challenges.

With palm oil prices remaining buoyant on global markets and currency depreciation supporting naira earnings, Okomu is increasingly being seen as a quasi-hedge against FX volatility.

“The market appears to be assigning a premium for companies with a natural currency mismatch in their favour,” said Seyi Adewale, an equity strategist at Lagos-based investment firm. “Okomu fits that profile well with strong exports, limited import dependence, and steady margins.”

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BUA Cement Plc follows closely at 6.7x, leveraging an expansive capital expenditure drive, robust pricing power, and a dominant position in northern Nigeria. Despite the weight of rising energy costs, the firm’s recent efforts in deploying alternative fuel sources like LNG and solar have helped to preserve EBITDA margins above 35 percent.

“In FY’25, margins are expected to improve, supported by revenue growth and strategic cost management. The company is optimising its energy mix to include more locally sourced energy materials, aiming to reduce foreign exchange (FX) exposure,” analysts at CardinalStone wrote in a note recently.

They project the cement maker’s top line earning to rise to N1.3 trillion this year while post tax profit is estimated to more than double to N199.96 billion on lower FX losses and energy switches plans.

The inclusion of NAHCO (Nigerian Aviation Handling Company) at 6.0x may appear surprising given the sluggish recovery in Nigeria’s aviation sector. However, NAHCO’s diversified revenue sources, recent investments in cargo infrastructure, and potential for long-term concessions at strategic airports may be fueling bullish sentiment. A growing interest in non-oil exports and e-commerce logistics has also cast airport ground handling as a proxy for trade infrastructure plays.

Dangote Cement at 5.7x, maintains a comfortable valuation position. As Nigeria’s largest publicly listed company by market cap, it has weathered inflationary pressures better than peers. Its pan-African footprint, coupled with aggressive cost containment and a newly commissioned export terminal, reinforces investor belief in its scale advantage and FX earnings buffer.

With a likely reduction in foreign currency debt and relatively stable FX conditions, CardinalStone analysts anticipate a decline in the firm’s FX losses. “These improvements should drive a 10.4ppts increase in PBT margin to 30.8% and a 6.6ppts improvement in PAT margin to 20.7%.”

Unilever Nigeria and Presco, both trading around 4.0x–4.1x, mark the midpoint of the chart. Unilever’s inclusion is notable, given recent divestments in its homecare business and aggressive portfolio reshaping aimed at profitability over volume. Its turnaround may still be in early stages, but the valuation signals cautious optimism.

Presco, another palm oil major, benefits from similar macro tailwinds as Okomu. On June 17, Presco’s stock climbed by 1.52 percent to close at N1,000, pushing its market capitalization just over the N1 trillion mark. Meristem Research maintains a bullish stance on the stock, setting a target price of N1,062.52, suggesting further upside potential.

The stock has had an impressive run in 2025, rallying by 111 percent year-to-date after beginning the year at N475 per share. In 2024, Presco posted a net income of N77.8 billion, driven by revenue that more than doubled to N207.5 billion. In just the first quarter of 2025, it has already delivered a net income of N47.6 billion—more than half of last year’s total.

Its performance so far offers further evidence that investors are gravitating toward agriculture as a strategic hedge.

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Laggards reflect sector struggles

At the bottom of the valuation table lies Seplat Energy, trading at 2.8x EV/EBITDA, despite being a major oil and gas producer with assets in both onshore and offshore Nigeria. The discount reflects not only sector-wide concerns about regulatory uncertainty and the transition to cleaner energy but also Seplat’s recent struggles in closing its acquisition of ExxonMobil’s shallow-water assets, an ambitious $1.3 billion deal facing regulatory roadblocks.

“The energy space is clearly out of favour with local equity markets,” said Tola Alade, oil and gas analyst. “Even when you’re profitable like Seplat, investors are unsure about long-term stability in the operating environment.”

Nascon Allied Industries (3.0x) and Cadbury Nigeria (3.3x) represent legacy consumer goods players grappling with margin compression amid skyrocketing input costs, FX-related import bills, and subdued consumer demand. While their valuations look attractive on the surface, analysts caution that earnings volatility and working capital constraints make them vulnerable in the short term.

UACN and Lafarge Africa, both trading around 3.1x–3.5x, tell a tale of structural reorganisation and legacy debt. UACN, once a dominant conglomerate, has spent the last decade unwinding its sprawl and repositioning as a leaner investment holding company. Lafarge, a member of the Holcim Group, benefits from steady infrastructure demand but suffers from high energy intensity and FX exposure.

Julius Berger, at 3.6x, reflects investor anxiety around execution risk in Nigeria’s beleaguered infrastructure sector. Despite a strong order book and dependable federal contracts, concerns linger over the timeliness of payments, project delays, and forex sourcing for heavy machinery imports.

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Market median paints a mixed picture

The median EV/EBITDA multiple of 4.0x is a telling midpoint, suggesting the market remains undecided on Nigeria’s earnings trajectory across sectors. It also aligns closely with EM (emerging market) historical averages, implying the Nigerian equities are neither universally cheap nor collectively expensive—but increasingly sector-sensitive.

“EV/EBITDA is a relatively clean metric because it neutralizes the effects of capital structure and tax environment, which are especially volatile in Nigeria,” said Femi Osho, a portfolio manager at Lagos-based investment firm. “So when you see this kind of spread, from under 3x to over 7x, you’re seeing the market’s selective trust in cash flow visibility.”

What this means for investors

For value investors, the low multiples in consumer staples, infrastructure, and oil may present entry points but not without risk. Investors will need to distinguish between cyclical lows and structural declines. Conversely, for momentum investors, the premium valuations in cement, agro-processing, and aviation infrastructure suggest expectations of sustained top-line growth and export diversification.

Key macro risks persist. While the naira has seen some recent stability and headline inflation slows for the second consecutive month in May, volatility persists. Key benchmark interest rates still remain at record high at 27.5 percent. Yet the valuation gap suggests opportunities for rotation, especially as companies are set to report Q2 results and clarify FX exposures, pricing strategies, and cost control measures.

If the Central Bank of Nigeria (CBN) sustains a market-driven FX regime and macro reforms continue under the Tinubu administration, sectors with hard currency revenues (like agro-exports and industrials) may continue to attract higher multiples. But if policy backslides or inflation spirals, the risk premia on currently undervalued firms may widen further.