Absa Africa Financial Markets Index 2018 Launched

Barclays Bank Ghana has launched the 2018 Absa Africa Financial Markets Index in collaboration with the Official Monetary and Financial Institutions Forum (OMFIF) with support from Ministry of Finance. The new index, produced by the OMFIF and Absa, records the openness to foreign investment of countries across the continent and is an indicator of the attractiveness of Africa's capital markets.

Since its inception in 2017, the index has been the benchmark used by most countries to reflect on the state of their financial markets and what developmental actions they need to take. This has involved the development of key financial frameworks to ensure their market develop to attract foreign direct investment. This year, the 20 economies surveyed are: Angola, Botswana, Cameroon, Egypt, Ethiopia, Ghana, Ivory Coast, Kenya, Mauritius, Morocco, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Seychelles, South Africa, Tanzania, Uganda and Zambia. The index tracks progress across six pillars: market depth; access to foreign exchange; tax and regulatory environment and market transparency; capacity of local investors; macroeconomic opportunity; and enforceability of financial contracts, collateral positions, and insolvency frameworks.

According to the report, Ghana ranked 7^th with fifty-five points. Ghana also falls behind Nigeria and Mauritius on product diversity and currency availability. Hedging products also remain limited, with only cross currency swaps with one pair being in local currency, commodity swaps and FX forwards available in Ghana. Creating new products that are attractive to local and international investors is an issue raised by survey respondents. Ghana already plans to introduce real estate investment trusts on the exchange by the end of 2018. Continued market innovation is needed to increase the diversity of new instruments.

On pillar 5: Macroeconomic Opportunity the report said “…Ghana’s banking sector is of most concern. Its nonperforming loans to gross loans ratio is 21.6% against the Index average of 10.1%. However, the Bank of Ghana has taken steps to improve the quality of its banking sector. It has mandated that all commercial banks in the country set aside a minimum of GHS400m of capital by the end of 2018 to deal with these issues, three times more than previous requirements. In addition, Ghana needs to improve its macro data standards and the transparency of monetary policy decisions to boost its score in this pillar.”

Survey respondents highlighted that the lack of knowledge and expertise of pension fund trustees and other asset owners hinders the development of new financial products, by reducing their demand for more sophisticated assets and strategies to diversify returns. The index also shows that improvements in market infrastructure and regulatory frameworks could boost the performance of countries in the middle of the index over coming years.

Download a copy of the document here: http://bit.ly/AFMIndex2018