energy sector

"Why is your Seplat share doing better than my bank share this month?" Adaeze asked her cousin Tunde on a Sunday call to London.

"Because oil price went up last week," Tunde said. "Seplat is energy sector. My bank share does not care what happens to a barrel of crude, it cares about interest rates and how many loans go bad."

That short exchange holds the whole idea. The energy sector is simply the group of companies whose business is digging up, refining, transporting or selling the things that power homes, cars and factories. Oil and gas majors sit here, so do the marketers who sell you petrol at the filling station, and so do the newer solar and power companies calmly wiring up estates in Lagos and Abuja.

On the Nigerian Exchange, names like Seplat Energy and Oando represent this sector, and their share prices tend to rise and fall with the price of oil on the world market, along with naira issues around fuel importation and subsidy policy. In London, a Nigerian professional holding shares in Shell or BP through an investment app is exposed to the same sector, just a different postcode.

Investors watch the energy sector closely because it is a mood ring for the wider economy. When oil prices climb, energy company profits often climb too, and in Nigeria that can mean more government revenue, a stronger naira story and a livelier stock market overall. When oil prices fall, the opposite tends to happen, and portfolios heavy in energy shares can feel it fast.

For someone sending money home or building savings from abroad, understanding the energy sector helps explain why Nigerian markets sometimes move on news that has nothing to do with Nigeria at all, like a decision made by oil producing countries thousands of kilometres away.