The Bank of Ghana (BoG) says African countries should institute policies that are focused on developing a vibrant capital market to support growth.
The Central Bank also called for benchmarking of internal regulation against global standards to help improve standards, overcome regional integration challenges to support growth, and leverage on new technology and data sharing to improve efficiency and innovation.
Speaking at the launch of the Absa Africa Financial Markets Index 2019, First Deputy Governor of the Bank of Ghana, Dr. Maxwell Opoku-Afari said Ghana’s economy was going through structural transformation and initiated policies were supporting the move in that direction.
“Our experiences in Ghana as a major destination for higher yield-seeking nonresident investors, tells us that access to foreign exchange, the Pillar 2 of the ABSA Financial Market Index, is an important consideration for both bond and equity investors. These investors many times would like to repatriate coupon proceeds, sometimes principal repayments on matured bonds and dividends in hard currency. This is more so during periods of tighter global financing conditions.”
Dr. Opoku Afari said it was important to develop liquid, deep and efficient domestic interbank markets that can support these foreign investors to give them the required comfort to continue to invest in our markets, adding a liquid interbank market can be well supported when the central bank has adequate foreign reserves.
“It is for this reason that the Bank of Ghana has in the past few years focused on building on our foreign reserve buffers to support our price stability mandate”, he added.
The capacity of local investors, pillar 4 of the Absa Africa Financial Market Index is an important pillar which has become more critical going forward.
In Ghana, the First deputy Governor said “we are beginning to realize the important role that institutional investors such as our pension funds, asset managers and insurance firms could play in not only financing part of government budget but also providing long-term funding for capital projects. This has become important as we seek to find the right balance between domestic and foreign sources of funding.”
The ABSA African Financial Markets Index was first launched in 2017 by OMFIF and Barclays Africa Group (now ABSA Group Limited) through extensive quantitative and qualitative research and analysis. It is in its third year and has become a key reference point in the assessment of the development of African Financial Markets.
Kenya, Morocco and the Seychelles have had the largest improvement in their rankings over the last year, particularly with respect to access to foreign exchange. Nigeria’s score has also strengthened, due to policies augmenting market depth and enhancing the capacity of local investors.
The index has therefore served as a guide to where analyst and policy makers must focus in trying to improve their financial markets to attract investors.