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CEO of EFG Hermes Frontier speaks on Nigeria’s ‘exciting investment opportunities’

EFG Hermes recently organised its 15th Annual One on One Conference which took place between March 3rd and March 7th, 2019.

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EFG Herms

EFG Hermes recently organised its 15th Annual One on One Conference which took place between March 3rd and March 7th, 2019. In the wake of the conference, Nairametrics had an interview with Mr Ali Khalpey, Chief Executive Officer of EFG Hermes Frontier. Below are some excerpts of the conversation:

Nairametrics: Nigeria has seen a post-election surge in investment appetite for its fixed income securities. With EFG Hermes presence in Nigeria, will the company’s area of focus be more on fixed income or will it be spread evenly over other securities?

KHALPEY: EFG Hermes has historically been focused on equities. In brokerage, equities have formed the backbone of our success and today it is still where the strength of our franchise sits. However, we have successfully built a very strong Advisory business around our equities platform and most recently we have opened a fixed income desk in Dubai. In Nigeria, we will gradually explore opportunities in the fixed income space, but our primary area of focus until we consolidate this business, will be in equities.

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NAIRAMETRICS: Nigeria had only one IPO in 2018. Does EFG Hermes house any ambitions of advising companies in Nigeria to list on the Nigerian stock Exchange?

KHALPEY: We certainly do. We are very focused on expanding the listed universe in Nigeria. Today, the market capitalization of the Nigerian Stock Exchange All Share Index (cNGN11trn) represents only 7% of 2019E GDP (NGN155trn). There is significant scope for this to grow as more segments of the Nigerian economy are reflected in the stock exchange. The examples of industries that are under-represented in the NSE are telecommunications, up-stream oil & gas and agriculture.

NAIRAMETRICS: Specifically, South African Telecoms company, MTN, has said it will list on the Nigerian Stock Exchange by July 2019. They would be the first telecoms company in Nigeria to do so. How does EFG Hermes view the Telecoms sector in Nigeria and will that be a subject of attention for your firm?

KHALPEY: We believe that the formal listing of MTN Nigeria on the NSE is long overdue. MTN Nigeria has been a key participant in the development of Nigeria over the past decade and it is only appropriate that all Nigerians and international investors have the right to participate in this transformational equity story. With regards to the role that EFG Hermes will play in this listing, we cannot say at this junction. All we can say is that, we will be proud to participate in listing that we believe have the potential to transform the Nigerian capital markets.

NAIRAMETRICS: There has been a long-running debate in Nigeria’s economic circles on floating the Naira or maintaining the current practice of a managed float with interventions from the Central bank. Based on the experience of EFG Hermes over 30 years in other emerging markets, what currency management regime is more accommodating for your investment strategy?

KHALPEY: At EFG Hermes, we strongly value the independence of our research teams. In this regard, we in management have made it a principle not to challenge the independent thought of our economists. Looking back at their research over the various markets we cover, there has never been a hard and fast rule. On a personal note however, I have always found a freely floating exchange rate to be an easier environment in which to manage my businesses.

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NAIRAMETRICS: Seeing as the headline for the 15th annual One on One Conference is “Navigating the path to opportunities,” where do you see the most opportunities in Nigeria’s investment climate?

KHALPEY: Given the low level of equity penetration in Nigeria, as discussed earlier, Nigeria has a lot of exciting opportunities in almost all of its sectors. The market capitalization of its banks are far too small for the size of the balance sheets that they have built. The potential for consumption growth, given the size of Nigeria’s population means that the consumer sector is still a source of significant long-term alpha. Oil & gas is under-owned by local Nigerian companies and this process should continue to generate significant opportunities. Agriculture needs to come to the capital markets – private capital sees the value in agriculture, but has not vehicles to invest in.

NAIRAMETRICS: Does EFG Hermes intend to engage in M&A activities in Nigeria?

KHALPEY: If you are asking if we will be providing advisory services to our client in and outside Nigeria, the answer is yes. If you are asking if we will be keen to consolidate the brokerage industry in Nigeria, the answer today, would probably be no. We are very happy with the foothold we have in Nigeria and are keen to build this organically.

NAIRAMETRICS: Nigeria is yet to sign the African Continental Free Trade Agreement. What is the position of EFG Hermes in terms of what the agreement can do for trade within Africa’s borders?

KHALPEY: While we believe in the spirit of free trade across Africa, we also believe that all nations have a responsibility to their citizens and local businesses to carefully consider it before joining.

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NAIRAMETRICS: Does the EFG Hermes online trading platform cover securities for all the Emerging Market countries that the country has a presence in?

KHALPEY: Yes it does and many more. The online trading platform gives access to a vast number of emerging and developed equities markets globally. This is the real power of our platform

NAIRAMETRICS: Can we look forward to the One on One conference being hosted in Nigeria?

KHALPEY: What you can look forward to is EFG Hermes hosting many investor meetings, conferences and trips in Nigeria. We are keen to grow with Nigeria and want to actively participate in the transformation of its capital markets. Our goal is to be the investment bank of reference for Nigeria.

About the EFG Hermes Frontier CEO

Alinawaaz (“Ali”) Khalpey joined EFG Hermes in 2017 to lead the Firm’s drive into non-MENA frontier markets. He has more than 20 years of hands-on experience in frontier market equities with a particular focus on African and frontier Asia markets.

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Ali began his career in 1996 as a London-based Africa Analyst with BlackRock, rising to the rank of Vice President and Fund Manager. In 2002, Ali joined Investec Securities as Head of Institutional Sales then got relocated to Investec Securities USA as a Managing Director. Ali joined Renaissance Capital in 2010 in London as the Head of Pan African Equities.

Ali also co-founded Exotix Africa LLP with Exotix Partners in late 2013, serving as CEO and Global Head of Equities. Ali holds a BSc in Economics (First Class Honours) from the London School of Economics and Political Science.

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1 Comment

1 Comment

  1. Brian

    March 19, 2019 at 9:19 pm

    A very educative interview highlight. 💯✔️

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Economy & Politics

Nigeria’s public debt is officially N29.83 trillion

Further disaggregation of Nigeria’s total public debt showed that N9.99trn or 34.89% of the debt was external.

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Q1 2020 National Debt report

The total public debt stocks of the Federal Government of Nigeriastates within the Nigerian federation, and the Federal Capital Territory (FCT) jumped to N28.63 trillion as of Q1 2020. This is according to a report by the National Bureau of Statistics (NBS) which was released on Friday. 

A breakdown of the report showed that the total debt stock of the states as of 31 March 2020 is N4.1 trillion. Meanwhile, these states’ total Internally Generated Revenue (IGR) for 2019 was N1.3 trillion. They also received N2.47 trillion from FAAC. 

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Note that as always, Lagos State recorded the highest IGR at N398.7 billion. The state also received N117.8 billion in FAAC disbursements and has a total debt stock of N444.2 billion, thereby making up 10.8% of the total debt stock of the states. 

On the other hand, Yobe State recorded the lowest debt stock out of all the states with just N29.2 billion. This made up just 0.7% of the total debt stock of the states. Meanwhile, the state generated a total IGR of N8.4 billion in 2019. 

Part of the report by the NBS said: 

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“Nigerian States and Federal Debt Stock data as at 31st March 2020 reflected that the country’s total public debt portfolio stood at N28.63trn. Further disaggregation of Nigeria’s total public debt showed that N9.99trn or 34.89% of the debt was external while N18.64trn or 65.11% of the debt was domestic. 

“Similarly, States and FCT domestic debt was put at N4.11trillion with Lagos state accounting for 10.8% of the total domestic debt stock while Yobe State has the least debt stock in this category with a contribution of 0.7%.” 

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Meanwhile, the FCT had total debt of N106.8 billion, making up 2.6% of the total debt stock of the states. The FCT also recorded an IGR of N74.5 billion in 2019 and received N71.9 billion in FAAC. 

The Federal Government’s total domestic debt stock by Q1, 2020 was N14.5 trillion, with FGN bonds making up 72.5% of the total portfolio followed by treasury bills at 18.24%. 

The total public debt stock has risen by 4% since December 2019, as the previous figure stood at N27.4 trillion. 

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You may download NBS’ Nigerian Domestic and Foreign Debt report by clicking here.  

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Coronavirus

COVID-19: WHO reverses itself based on new discovery about the virus

This admission is coming on the heels of criticisms from experts.

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WHO warns countries against rushing to lift coronavirus restrictions

The World Health Organization (WHO) has provided an update on the modes of transmission of SARS-CoV-2, the virus that causes COVID-19, from infected people, based on new scientific evidence.

The WHO on Thursday, formally recognized that the coronavirus can be transmitted indoors by droplets in the air, marking a reversal for the United Nation’s agency.

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In a scientific brief, the WHO said that people who spend time in crowded places with poor ventilation are at risk of being infected by the coronavirus as the droplets circulate throughout the air in indoor gatherings.

This admission is coming on the heels of criticisms from experts who have been putting pressure on the UN health agency to update its description of the spread of the virus to include the possibility of airborne infections.

The WHO now admits that transmissions through aerosols, or tiny air droplets, could have been behind outbreaks of COVID-19 that have been reported in some closed environments such as restaurants, nightclubs, places of worship or places of work where people may be shouting, talking or singing.

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Apart from refraining from having close contact with infected people and frequent hand-washing, the WHO pointed out that people should avoid crowded places, close-contact settings, and confined and enclosed spaces with poor ventilation.

However, the WHO still focuses more on the spread of the virus by larger droplets that are discharged through coughing, sneezing and singing or from contact with a contaminated surface.

The WHO in its statement said, “Respiratory droplet transmission can occur when a person is in close contact (within 1 metre) with an infected person who has respiratory symptoms (e.g. coughing or sneezing) or who is talking or singing; in these circumstances, respiratory droplets that include virus can reach the mouth, nose or eyes of a susceptible person and can result in infection.”

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It also revealed that based on what is currently known, the transmission of COVID-19 primarily occurs from people when they have symptoms and can also occur just before they develop symptoms when they are in close proximity to others for prolonged periods of time. While someone who never develops symptoms can also pass the virus to others, it is still not clear to what extent this occurs and more research is needed in this area.

The UN health agency had previously advised that the spread of the virus through the air is only common when people, mostly health care workers, were involved in medical procedures that produced aerosols, though a lot of evidence has surfaced suggesting that the virus can stay in the air for hours and infect a person when inhaled.

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Energy

DisCos seek CBN funding for massive roll-out of meters to consumers

This, it was said will help DisCos meet the 2024 deadline which they had committed to.

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DISCOS, NERC, electricity tariffs, hotels, bars,

A Central Bank-funded massive roll-out of meters would expedite the efforts to achieve the full take-off of the proposed Service Reflective Tariff (SRT), Electricity distribution companies (Discos) have suggested.

According to Mr Sunday Oduntan, the Executive Director in charge of research and advocacy at the Association of Nigerian Electricity Distributors (ANED), such funding would help ensure that all electricity customers are adequately metered under the Meter Asset Provider (MAP) regulation.

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Oduntan, who said this in a statement to NAN on Friday, also disclosed that it would assist the distribution companies to meet the 2024 deadline which they had committed to, for metering all electricity consumers.

READ ALSO: DisCos earn N473 billion in 2019, reveal reason for metering gap

He recalled that Mr Ernest Mupwaya, Managing Director of Abuja Electricity Distribution Company (AEDC), had spoken on behalf of the DisCos at the House of Representatives Public Hearing on the power sector on Thursday.

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According to Mupwaya, the Capital Expenditure (CAPEX) provision in Nigeria’s electricity tariff was insufficient to cover the cost of metering customers.

“Over the years, there has been insufficient investment in customer metering, due to inadequate Multi Tariff Order (MYTO) CAPEX and uneconomic tariff. The approved CAPEX for DisCos has never been adequate for comprehensive metering,” he said.

He added that the Discos were requesting CBN to provide funds for emergency mass metering projects since they no longer had a provision in their CAPEX for metering. If approved, the project would be completed within a period of 18 months.

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Mupwaya added that the funding was even more necessary since no provisions had been made for metering in the event that the MAP regulation failed.

The first quarter of 2020 had seen an average monthly growth of 75,000 new customers every month, moving the number of metered customers in Nigeria above 10 million, and decreasing the metering penetration from 45.5 percent in January 2017 down to 40.3 percent in March 2020.

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“Plugging the metering gap that is in excess of six million meters has been slow because even the recently introduced MAP regulations incorporate inappropriate meter pricing and so, it is not working as NERC/DisCos expected.

READ ALSO: Budget: Bill to compulsory 40% allocation to capex passes second reading

“The twin effects of the sudden increase in import duties of 35 percent on meter and NERC’s wrong pricing frustrated the good intentions of MAP” he noted.

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He appealed to the government to grant full waivers on the 35 percent increased duty surcharged on meters, until mass metering was achieved, and to fix an appropriate and commercial price on meters.

He added that the cap on estimated billing had discouraged consumers from obtaining meters under the MAP regulation, and urged the NERC to allow Discos go ahead with estimated billing, introducing the capping only after the massive meter roll-out after 18 months.

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