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.
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.
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.
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.
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.