NGX: Agriculture Sector Hit N300bn Market Capitalisation

Agriculture sector on the Nigerian Exchange (NGX) Limited market capitalization stood at N300.958 billion as at the end of the October 2022.

The sector represents 0.64 per cent of the total NGX market capitalisation, which is N23.878 trillion as at the period under review. There are five companies listed on the agriculture sector on the official list of NSE, they are; FTN Cocoa Processors, Okomu Oil, Presco, Ellah Lakes and Livestocks.

Okomu Oil Palm with a market capitalisation of N161.688 billion and Presco Plc, a market capitalisation of N128.350 billion are the two dominant stocks in the agriculture sector. With market total capitalisation of about N290.038 billion, the two stocks account for 96.37 per cent of total market capitalisation of the five stocks listed under the agriculture sector. This is due to their proven track record of delivering revenue growth and rewarding shareholders.

The capital market performs many roles that are critical for the growth and development of an economy and with agriculture being the main point of national transformation agenda, few companies in the sector are listed on the NGX.

Analysts are of the view that agriculture is an important sector of the economy and one of the real sectors whose growth has multiplier effects on the economy, saying that the sector needs long term funding and can be gotten from the market.

They noted that a vibrant Commodity Exchange will help in boosting listed agricultural companies’ revenue.

Analysts at United Capital Plc in its report titled: ‘Unlocking Nigeria’s Agricultural Potential’ said “the federal government via the minister of agriculture & rural development recently approved a five-year tax and duty-free holiday for agricultural production and processing in Nigeria, tax-free agricultural loans with a moratorium period of over 18 months and a repayment period of not more than seven years; and zero-tariff rates on the importation of agrochemicals.”

According to United Capital, these incentives are designed to encourage investments from private sector players in the agriculture sector, and facilitate increased food production output, processing, and marketing. Furthermore, the federal government recently restocked the Strategic Food Reserve with 200,000MT of assorted food commodities, amid lingering worries of potential food shortage in the aftermath of the recent flood devastation in the country.

“The issue of food security and maximising Nigeria’s agriculture potential has dominated the agenda of economic managers in the country. However, only very moderate success has been recorded in recent years. As a result, food demand continues to outpace supply, keeping food inflation at elevated double-digit levels. Nigeria’s September 2022 food inflation climbed to 23.3 per cent year-onyear, 22bps faster than the 23.1 per cent Y-o-Y climb recorded in August, 2022.

“The recent flood crisis across key food producing states in Nigeria has dampened farm output expectations for this year’s harvest season, destroying farm produce in their variety including rice, sorghum, millet, groundnut, and sugarcane, threatening to keep food prices elevated. For context, the unit price of 50kg of Rice rose to a record high of N37,000 on average in October, 2022.”

The research firm believed the FG’s move to grant incentives to players in the agricultural sector is a welcome development, albeit not enough, saying “first, in the immediate term, we expect further upward pressure on food prices as the impact of the recent flood disaster bites. In the medium to long term, we believe granting tax breaks and waivers on duties will be inadequate to spur private sector interest on the level required.

“Key fundamental issues such as insecurity in food producing states, land law reforms and encouraging investments in storage & transport facilities need solving before fiat-type interventions would produce results. That said, we note this would be a positive development for existing players in the agricultural space which could brighten the outlook for listed stocks like Okomu Plc and Presco Plc.”

Speaking, head, Securities Dealing Desk, Golden Securities Limited, Azeez Bello said that listed companies in the Agricultural sector will benefit from patronising an organised commodity through improved market access for their outputs as the commodity exchange trading platforms will facilitate increase in demand and supply.

For third quarter (Q3), ended September 30, 2022, Okomo Oil, released its results, reporting a 52 per cent decline in pre-tax profit to N1.1 billion down from N2.3 billion recorded in Q3 2021. The result is on the back of sustained supply chain/price disruptions of CPO in the international market influenced by the Russian/Ukraine crisis. A review of the financial statements showed that Q3, 2022 revenue grew by 26.99 per cent to N9.421 billion compared to N7.419 billion in Q3, 2021.