FirstRand to see 50 percent growth in Nigerian business on rising deals

…set to bring 3 IPOs to market in 2014

FirstRand Ltd is expecting a 50 percent growth in its Nigerian business this year as it increases its deal footprint across diverse sectors of the economy.

“We will see a 50 percent increase in performance across all our businesses, subject to the various uncertainties and risks that are in the markets, although we are coming from a low base, “Michael Larbie, Chief Executive Officer of Rand Merchant Bank (RMB) the Nigerian unit of FirstRand, said in an interview i had with him yesterday at their Lagos headquarters.

“The prospects for 2014 are quite encouraging, even with elections uncertainty which is to be expected. The types of transactions we are seeing however will stand the test of time.”

FirstRand’s signature deals for 2014 include the Lekki port project, a fertilizer project and an independent power plant, according to Larbie.

“We remain ready to participate a lot more in the power sector. With phase one of the PHCN privatization done, we think a lot more transactions need to happen to actualize the power targets of 40,000 MW,” said Larbie.

“We think the successor companies to PHCN are going to need a lot of money maintain existing infrastructure and improve capacity generation.”

RMBs Nigerian businesses currently consist of financial advisory, structured products, corporate lending, trade finance, letters of credit (LCs), fixed income trading and FX trading.

The bank expects to enter the stock broking and equities trading business once it puts its platform together and secures the necessary licenses from the regulatory bodies.

“There is also the custody and asset management business, which are all verticals that over time one would expand into,” said Larbie.

The bank is set to bring a number of names to the IPO market this year.

“We are engaged on several IPO mandates, in the Agro processing, FMCG and ICT space,” said Larbie.

“I am quite encouraged by the variety of sectors these names are coming in from…the pipeline looks encouraging.”

FirstRand opened an investment banking unit in Nigeria in 2012. Some signature deals RMB participated in last year include the $3 billion in local and foreign currency transaction for MTN, of which it participated to the tune of $200 million.

Dangote’s $3.3 billion dollar deal for a 400,000 barrels a day refinery and fertilizer plant, and a fund raise for African steel mills a Nigerian based steel manufacturer.

It also concluded a transaction for the Africa Finance Corporation (AFC) late last year, as mandated lead arranger for a $250 million syndicated loan.

In the oil and gas space the bank provided loans to the NNPC Exxon Mobil JV, was financial advisor and lender to Oando for the Conoco Phillips acquisition, and is “currently engaged with several indigenous companies on marginal fields divestiture by Shell,” Larbie said.

RMB would be willing to partner with the Mortgage Refinance Corporation, in creating securitization structures that allows the deepening of the mortgage market and involvement of PFAs and other investors into the real estate sector, by providing properly packaged real estate Mortgage backed securities (MBS), according to Larbie.

“We are active participants in the real estate sector in Nigeria, and have just broken ground to build Oando’s new HQ. We acted both as an equity investor as well as a debt financier for that project,” he said.