Why EFG Hermes wants to operate in Nigeria
As part of its expansion plans, EFG Hermes, an Egyptian investment bank is considering acquiring a firm in Nigeria. Having solidified its operations in the MENAP (Middle East North Africa and Pakistan) region, the company is expanding into other parts of Africa. An acquisition shortens the break even period for the firm and enables it to build on an existing brand name.
EFG recently began operations in Pakistan, and wants to have operations in frontier markets. Frontier markets refer to equity markets of smaller, yet’ investable’ markets of developing countries. Big investment firms tend to shy away from such markets due to a lack of liquidity. The interest in Nigeria shows the country is on the verge of exiting recession. Industries in the country will need to raise capital for expansion projects. The Nigerian Stock Exchange (NSE) is up over 20% year to date, buoyed by renewed enthusiasm from foreign investors and changes in PFA asset allocation rules.
Investment banks in the country, may be in for more competition as the firm will most likely charge lower rates in order to gain more clients. It may also poach top staff from investment banks in the country. EFG’s coming, creates more exposure for the Nigerian financial markets as the firm, will include Nigerian equities in its coverage. Rand Merchant Bank, a South African based firm, has also expressed intentions in buying a Nigerian bank.
EFG Hermes was founded in 1984, and currently operates in the United Arab Emirates, Saudi Arabia, Jordan, Kuwait, Omar, and Pakistan. The company has 880 staff and manages $2.4 billion worth of assets. First quarter 2017 revenues increased from EGP 400 million in 2016 to EGP 825 million in 2017. Operating profits increased 201% year on year to EGP236 million as at Q1 2017 from EGP 79 million in the corresponding period for 2016. The company is listed on the Cairo Stock Exchange.