African markets still innovating amid liquidity struggles | Dailytrust

African markets still innovating amid liquidity struggles

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Innovations in sustainable finance and digital transformation, alongside important initiatives in transparency and regulation, will help reinvigorate Africa’s financial markets as they recover from the impact of Covid-19.

This is according to research in the latest African Financial Markets Index from Official Monetary and Financial Institutions Forum (OMFIF) in association with Absa Group.

Out of 23 countries in the index, 19 score lower than last year. This decline reflects more difficult market conditions, methodological changes, and the inclusion of environmental, social, and governance indicators in the index.

Only 13 countries in the index have Environmental, Social, and Governance (ESG)-focused policies in financial markets, and nine countries have introduced sustainable finance products.

Nigeria, South Africa, and  Mauritius and maintain their lead in the index, though with scores slipping in 2021 for all three. 

Ghana and Uganda enter the top five for the first time, both earning points for progress in Pillar 6: Enforceability of standard master agreements.

Nigeria gains the lead in Pillar 3: Market transparency, tax and regulatory environment. Namibia maintains its lead in Pillar 4: Capacity of local investors, while Egypt tops Pillar 5: Macroeconomic opportunity. South Africa remains on top for Pillar 1: Market depth and Pillar 2: Access to foreign exchange. It ties for first with Ghana and Nigeria in Pillar 6: Enforceability of standard master agreements.

The index measures financial market development in 23 countries from across the African continent, highlighting economies with the most supportive environment for effective markets. The aim of the index is to show how economies can improve the market framework to bolster investor access and sustainable growth, and act as a benchmark for investors and policy-makers.

Charles Russon, chief executive of corporate and investment banking, Absa, said of the index’s findings: ‘While some might find it disheartening to see the average score across the board drop, Africa is navigating an extremely tricky economic atmosphere.

He said  Recovery from the Covid-19 pandemic has not been as straightforward as we would have hoped last year, and this has had a large impact on the twin challenges the continent faces in reinvigorating financial markets post-pandemic while strengthening market infrastructure.’

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